The standard Commercial General Liability policy provides liability coverage for the “Designated Premises” set forth in the policy’s Declaration Page. Those premises are customarily identified in the application for insurance submitted by the insured as part of the underwriting process. Many CGL policies expressly limit coverage to liability arising out of the Designated Premises.
What happens when the insured contracts for a major expansion of those designated premises and a construction worker is injured while erecting the new, expanded space? More to the point, is that new space considered part of the Designated Premises covered by the owner’s CGL policy?
There is no liability coverage for the owner according to the Appellate Division, First Department in Seneca Insurance v. Cimran Co., Inc. In Cimran, the owner submitted an application for insurance describing the premises as a one story building occupied by a billiard hall and health spa. After the policy became effective, the owner contracted to add three additional stories to the property and, according the plaintiff’s bill of particulars, a worker was injured on the fourth place at the construction site.
Reaffirming “an ancient principle of insurance law,” the First Department, in the closely decided 3-2 decision, held that the fourth floor was not part of the insured premises and therefore was not covered by the Seneca policy. The insurer reasonably relied on the description of the premises set forth in the application, so the court reasoned that there could be no real dispute or confusion that coverage was limited to the one story building and did not include the three additional stories under construction.
Given the two dissents, we expect the Court of Appeals, New York’s highest court, to review the Cimran decision in the future. Of note, it is unclear from the Appellate Division decision whether the Seneca policy expressly limited coverage to the premises designated in the policy’s declaration page.
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