The trial court agreed with the insurer that the damage to the retaining wall was not covered under the policy because the policy excluded loss caused by flood and/or surface water.

The Provencal appealed. With respect to the policy exclusion concerning flood and surface water, The Provencal did not dispute that the exclusion applied to the facts of this case and, therefore, would bar coverage for the damage sustained to the retaining wall. Instead, it argued that because Tower had not identified this specific ground in its letter disclaiming coverage, it was precluded from relying on it.

New York Insurance Law

New York's insurance law provides:

If under a liability policy issued or delivered in this state, an insurer shall disclaim liability or deny coverage for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state, it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant.

New York Insurance Law § 3420(d)(2).

The Appellate Court's Decision

The appellate court affirmed.

In its decision, it acknowledged that there was a body of case law involving liability insurance claims falling within the ambit of New York Insurance Law § 3420 that imposed requirements on an insurer to give timely and detailed written notice if the insurer was disclaiming liability or denying coverage for death or bodily injury arising out of an accident.

The appellate court added, however, that where (as in this case) the underlying insurance claim did not arise out of an accident involving bodily injury or death, Insurance Law § 3420 and its “heightened requirements” did not apply.

Therefore, the appellate court ruled, the insurer's failure to specifically identify the flood and surface water exclusion in its disclaimer letter had to be considered under common law waiver or estoppel principles.

It found that waiver – the “voluntary and intentional relinquishment of a known right” – did not apply in this case because the failure to disclaim based on an exclusion did “not give rise to coverage” that did not exist, under New York law.

Moreover, the appellate court continued, estoppel – which may preclude an insurer not obligated to provide coverage from denying coverage on proof that the insurer “by its conduct, otherwise lulled [the insured] into sleeping on its rights under the insurance contract” – required proof that the insured had suffered prejudice by virtue of the insurer's conduct. The Provencal had “failed to make the requisite showing of prejudice,” the appellate court ruled and, as a result, there was no basis to estop the insurer from relying on a policy exclusion not detailed in the letter disclaiming coverage.

The case is The Provencal, LLC v. Tower Ins. Co. of New York, No. 31262/12 (N.Y. App.Div. 2d Dep't April 6, 2016). Attorneys involved include: Bleakley Platt & Schmidt, LLP, White Plains, N.Y. (Susan E. Galvao and Robert D. Meade of counsel), for appellant; Mound Cotton Wollan & Greengrass, New York, N.Y. (Daniel M. O'Connell and Kevin F. Buckley of counsel), for respondents.