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Failure to Cite to a Specific Exclusion Did Not Invalidate the Disclaimer of Coverage

The Appellate Division 2nd Department, in Provencal, LLC v. Tower Insurance, reaffirmed the principle that an insurance carriers failure to cite to an exclusion in its disclaimer would not invalidate the disclaimer where the loss did not involve “death or bodily injury” as required by Insurance Law 3420 (d) and where there was no showing of waiver or estoppel.

Tower denied a claim for damage to a building which resulted from heavy rains and the ultimate collapse of a wall at the boundary of the premises.  Tower’s disclaimer, and while citing to other exclusions, failed to specifically cite to the flood and/or surface water exclusion.

The trial court found that the flood and/or surface water exclusion applied.  The Appellate division, affirming the lower court decision, held that Insurance Law 3420 did not apply and that the common law principles of waiver and estoppel would not invalidate the disclaimer under the facts of this case.

The court in so finding held:

Waiver, which is a voluntary and intentional relinquishment of a known right, does not apply here because “the failure to disclaim based on an exclusion will not give rise to coverage that does not exist” (New York Univ. v Continental Ins. Co., 87 NY2d 308, 323; see Albert J. Schiff Assoc. v Flack, 51 NY2d 692, 698). Under the principles of estoppel, an insurer, though in fact not obligated to provide coverage, may be precluded from denying coverage upon proof that the insurer “by its conduct, otherwise lulled [the insured] into sleeping on its rights under the insurance contract” (Gilbert Frank Corp. v Federal Ins. Co., 70 NY2d 966, 968; see Albert J. Schiff Assoc. v Flack, 51 NY2d 692, 699). Estoppel requires proof that the insured has suffered prejudice by virtue of the insurer’s conduct (see Allstate Ins. Co. v Gross, 27 NY2d 263, 269; Brink v Hanover Fire Ins. Co., 80 NY 108, 113; Legum v Allstate Ins. Co., 33 AD3d 670; Greater N.Y. Sav. Bank v Travelers Ins. Co., 173 AD2d 521, 522; Guberman v William Penn Life Ins. Co. of N.Y., 146 AD2d 8, 12). Because the plaintiff failed to make the requisite showing of prejudice, there was no basis to estop the defendants from relying on policy exclusions not detailed in their letter disclaiming coverage.

Rosa M. Feeney, Esq.

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