In Margulies v. USAA Cas. Ins. Co., 191 A.D.3d 559 (1st Dept. 2021), the court noted: "The duty to defend, having arisen out of the allegations of the complaint, 'remains even though facts outside the four corners of [the] pleadings indicate that the claim may be meritless or not covered' (Automobile Ins. Co. of Hartford v. Cook, 7 N.Y.3d 131, 137 [2006]." See also American States Ins. Co. v. Graphic Arts Mut. Ins. Co., 193 A.D.3d 608 (1st Dept. 2021).

In Union Mutual Fire Ins. Co. v. Johnson, 189 A.D.3d 1519 (2d Dept. 2020), the court stated: "'The duty to defend is triggered whenever the allegations of the complaint, liberally construed, suggest a reasonable possibility of coverage, or the insurer has actual knowledge of facts establishing a reasonable possibility of coverage [citations omitted].' '[A]n insurance carrier can be relieved of its duty to defend if it establishes, as a matter of law, that there is no possible factual or legal basis on which it might eventually be obligated to indemnify its insured under any policy provision' [citation omitted]. 'An insurer may also disclaim on the basis of a policy exclusion by demonstrating that the allegations of the complaint cast that pleading solely and entirely within the exclusion [citations omitted].'" See also McAleavey v. Chautauqua Patrons Ins. Co., 195 A.D.3d 1551 (4th Dept. 2021); Place v. Preferred Mut. Ins. Co., 190 A.D.3d 1208, 1209 (3d Dept. 2021).

Further, as observed by the court in Dormitory Authority-State of New York v. RLI Ins. Co., 191 A.D.3d 592 (1st Dept. 2021), "'Policy exclusions are subject to strict construction and must be read narrowly, and any ambiguities in the insurance policy are to be construed against the insurer [citation omitted].' 'When an insurer seeks to disclaim coverage on the … basis of an exclusion, … the insurer will be required to provide a defense unless it can be demonstrated that the allegations of the complaint cast that pleading solely and entirely within the policy exclusions, and, further, that the allegations, in toto, are subject to no other interpretation [citations omitted].'"

Application of the Rules—Intentional Conduct

In Rinaldi v. Wakmal, 183 A.D.3d 652 (2d Dept. 2020), the plaintiff was involved in a physical altercation with the defendant. It was undisputed that the plaintiff struck the defendant twice in the face during the altercation. The defendant subsequently sued the plaintiff in a personal injury action. An insurance coverage dispute subsequently ensued, when plaintiff submitted the claims against him to both his homeowners' and his auto insurers. The court held that the coverage provided by the auto policy was limited to "accidents arising out of the ownership, maintenance, or use of the covered vehicle" and that the auto insurer met its initial burden of establishing, prima facie, that the incident in question, a physical altercation that took place after both parties had left their respective vehicles, did not arise from the ownership, maintenance, or use of the covered vehicle. Similarly, the homeowners' insurer demonstrated, prima facie, that despite the manner in which the cause of action in the underlying case was labeled, the assault alleged therein was an intentional act, which did not constitute an occurrence within the meaning of the policy. Since there was "no legal basis" upon which the insurers could be held liable for coverage, they had no obligation to defend or indemnify the insured. Moreover, coverage for the plaintiff's conduct was also barred by exclusions in both policies for bodily injury caused by, or resulting from, intentional acts of the insured.

In Scalzo v. Central Co-op Ins. Co., 186 A.D.3d 998 (4th Dept. 2020), the underlying tort action arose from an incident in which the plaintiff, allegedly in defense of his wife, struck his neighbor, defendant Robert J. Salerno, once or twice with his fist. The incident occurred on or near the plaintiff's property and, although criminal charges against the plaintiff were dismissed, Salerno commenced the underlying tort action against the plaintiff. The first cause of action alleged that the plaintiff "assaulted [Salerno] by seizing him, striking him and punching him in the face and in particular the left eye, among other areas of the body" and that those actions were "willful, intentional, unwarranted and without just cause or provocation." The second cause of action alleged that the plaintiff "negligently struck [Salerno] so as to sustain serious injury" and that the plaintiff "acted in a reckless, careless and negligent manner toward [Salerno]." Plaintiff sought coverage under his homeowners' policy, but his insurer denied coverage based on an exclusion providing that the policy did not apply to "liability … caused intentionally by or at the direction of any insured." Plaintiff subsequently commenced an action seeking a declaration that the insurer was obligated to defend and indemnify him in the underlying tort action.

In reversing the order of the Supreme Court, the Fourth Department noted that it agreed with the insurer that it established that the policy exclusion for intentional actions was applicable and that it therefore had no duty to defend or indemnify the plaintiff in the underlying tort action. "In assessing whether a policy exclusion for injuries 'intentionally caused' by the insured applies, a court must look to the pleadings in the underlying action and 'limit [its] examination to the nature of the conduct [of the insured] as it is there described' (Allstate Ins. Co. v. Mugavero, 79 N.Y.2d153, 159 [1992]). The 'analysis depends on the facts which are pleaded, and not the conclusory assertions' (id. at 162). When a complaint alleges in a conclusory manner that an assault was committed negligently, an insurer has no duty to defend where the insured does not provide 'evidentiary support for the conclusory characterization of [the] conduct as negligent or provide an explanation of how the intrinsically intentional act of assault … could be negligently performed' [citations omitted]. An insured may not 'exalt form over substance by labeling [an underlying tort] action as one to recover damages for negligence' where the conduct is inherently intentional [citation omitted]." There, the court held that the second cause of action in the Salerno complaint contained "no more than a conclusory characterization of plaintiff's conduct as negligent without any supporting factual allegations." Thus, the court concluded that "the complaint in the underlying action does not contain sufficient allegations of negligence to avoid the policy exclusion." Further, the court stated that "even assuming, arguendo, that plaintiff intended only to punch Salerno but not to injure him, the injuries were intentionally caused inasmuch as harm was inherent in the nature of the acts alleged [citing Allstate Ins. Co. v. Mugavero, supra, 79 N.Y.2d at 160]."

In NHJB v. Utica First Ins. Co., 187 A.D.3d 1498 (4th Dept. 2020), the dispute over insurance coverage arose from an incident in which an individual named William Sager Jr. sustained fatal injuries when a bar manager at a nightclub shoved him, causing him to fall down an entire flight of stairs. The bar manager ultimately pleaded guilty to manslaughter in the first degree (Penal Law §125.20 [1]) and was sentenced to 18 years in prison. At all relevant times, the plaintiffs in this action, the owners/operators of the premises, were insured by a policy issued by Utica First, which disclaimed coverage when initially notified about the incident within days of its occurrence. After a personal injury action was commenced against the plaintiffs, among other parties, the plaintiffs again sought coverage from Utica First, which again disclaimed coverage, relying in large part on an assault and battery exclusion contained within its policy. Although the court concluded that "the incident constitutes an occurrence under the terms of the policy)," it nevertheless held that coverage for the incident was precluded by the policy's assault and battery exclusion.

In their motion for partial summary judgment, the plaintiffs contended that, inasmuch as the 27th cause of action in the underlying personal injury action sought damages under a theory of premises liability, there was at least one cause of action that was not precluded by the assault and battery exclusion, and that defendant must, therefore, defend the plaintiffs on all causes of action. The court, however, agreed with the defendant insurer that all of the claims against the plaintiffs in the underlying action were "based on" or "arose out of" the bar manager's assault, "without which [the plaintiff in the underlying personal injury action] would have no cause of action" (U.S. Underwriters Ins. Co. v. Val-Blue, 85 N.Y.2d 821, 823 [1995]). In other words, 'no cause of action would exist but for the assault' and, therefore, the assault and battery exclusion is applicable and precludes coverage (Mount Vernon Fire Ins. Co. v. Creative Housing, 88 N.Y.2d 347, 350 [1996]; see U.S. Underwriters Ins. Co., 85 N.Y.2d at 823 …)."

On the other hand, in Unitrin Auto & Home Ins. Co. v. Sullivan, 179 A.D.3d 970 (2d Dept. 2020), the defendant, Ciminello, commenced an underlying action to recover damages for personal injuries against, among others, the defendant, Sullivan. Ciminello allegedly sustained injuries when he was struck by a cup thrown out of a window of a vehicle operated by Sullivan. At the time of the incident, Sullivan was insured under a combination homeowners and automobile policy issued by Unitrin. The homeowners' personal liability part of the policy provided that Unitrin would indemnify the insured for a bodily injury damages claim caused by an "occurrence," which was defined by the policy as "an accident." The automobile liability part of the policy provided that Unitrin would pay damages for bodily injury for which any insured becomes legally responsible because of an automobile accident. The policy also contained a personal catastrophe liability endorsement, which provided that Unitrin would pay that portion of the damages for bodily injury for which a covered person is legally responsible which exceeds the retained limit.

The court held that Unitrin established its prima facie entitlement to judgment as a matter of law declaring that there was no coverage under the homeowners' personal liability and automobile liability sections of the policy by submitting evidence demonstrating that the claim did not arise out of an accident, but, rather, was the result of Sullivan's intentional act. In opposition, however, Ciminello raised a triable issue of fact as to whether the harm was inherent in the intentional act committed. Ciminello submitted evidence that, although Sullivan and his passenger intended to douse Ciminello with the liquid contained in the cup, there was no intent to throw the cup and strike Ciminello with it. Thus, the court held that "As the instant case does not fall within the narrow class of cases in which the intentional act exclusion applies regardless of the insured's subjective intent (see Slayko v. Security Mutual Ins. Co., 98 N.Y.2d 289, 293 [2002]), there is a triable issue of fact as to whether the event qualified as an 'accident,' as defined by the policy [citations omitted]."

In Union Mut. Fire Ins. Co. v. Johnson, 189 A.D.3d 1519 (2d Dept. 2021), the defendant, Christopher Briggs was injured at premises owned by the defendant Johnson when he sustained several gunshot wounds to his abdomen. Briggs commenced an action against Johnson to recover damages he sustained as a result of the shooting. During the relevant time period, Johnson was insured by Union Mutual. After it received notice that Johnson sought coverage for the underlying action, it sent Johnson a declination letter in which it stated that pursuant to the assault and battery exclusion, Johnson's liability for any damage that resulted from the shooting was not covered, and, further, as he had misrepresented the nature of his use of the subject premises, the policy was void ab initio.

In the underlying action, Briggs alleged in relevant part that: he "sustained injuries while lawfully at the [subject] premises, including severe injuries to his abdomen;" Johnson was "negligent in failing to properly monitor, secure, supervise and/or intervene to prevent an individual from entering the residence with a firearm;" the "incident occurred as a result of [Johnson's] negligence;" and that Briggs "sustained serious injuries, including a colostomy, as a result of [Johnson's] negligence." Further, the assault and/or battery exclusion in the subject policy carved out an exception to the exclusion for "bodily injury resulting from use of reasonable force to protect persons or property." As the record was silent as to the identity or motive of the shooter, the court held that Union Mutual failed to establish, prima facie, "that the allegations in the complaint and the underlying action cast that complaint solely and entirely within the assault and/or battery exclusion so as to entitle it to judgment as a matter of law."

Application of the Rules—Other Contexts

In Castlepoint Ins. Co. v. Southside Manhattan View, supra, the insurer issued a policy to Southside, which included a construction exclusion of bodily injury arising out of the "[c]hange, alteration, or modification of the size of any building or structure;" "[m]ovement of any building or structure;" [c]onstruction or erection of any new building or structure;" [d]emolition of any building or structure;" or "[c]onstruction, demolition, movement of any load-bearing wall or any modification to the structure of any load-bearing wall." The exclusion expressly provided that it 'applies to any work performed as part of or in connection with any of the foregoing [enumerated operations]," and "applies regardless of whether the described operations are ongoing, completed or in any other stage when the loss occurs." The underlying plaintiff alleged that while working on sprinklers at the subject premises as part of a renovation project, he fell off a ladder after coming in contact with live, uninsulated electrical wires. The insurer disclaimed any duty to defend or indemnify Southside in the underlying action, citing the exclusion mentioned above. In affirming the trial court, the First Department held that the insurer was not obligated to defend or indemnify its insured because it had met its prima facie burden of demonstrating that the underlying plaintiff's work installing and repairing sprinklers was "in connection" with the operations enumerated in the construction exclusion, and the insured, Southside, failed to raise a material issue of fact.

In Damon G. Douglas Company v. Mt. Hawley Ins. Co., 193 A.D.3d 610 (1st Dept. 2021), an employee of a sub-subcontractor brought a negligence action against the owner of the property and the general contractor seeking to recover damages for injuries he sustained when he fell 15 feet while performing metal work on a building being constructed. The subcontractor's excess insurer brought a third-party action against the sub-subcontractor's excess insurer seeking a declaration that the sub-subcontractor's excess liability policy, which named the subcontractor as an additional insured, provided coverage for the employees' injuries, after the sub-subcontractor's insurer denied coverage on the basis of an "exterior work over two stories" exclusion. That exclusion eliminated coverage for certain activities including "[a]ny exterior work over [two] stories, and ground up construction over [two] stories while the insured is operating in the capacity of a general contractor, or any project that involves adding stories to an existing structure, whether done by an insured or by subcontractors on an insured's behalf." In affirming the order of the Supreme Court granting summary judgment in favor of the subcontractor's insurer, the court held that "the language in the exclusion provision, which is unambiguous, states that the policy at issue does not apply to bodily injury arising out of ongoing operations concerning the 'exterior work over [two] stories.' Although the construction of the building contemplated multiple floors, at the time of the accident, the injury did not arise out of exterior work over two stories [citation omitted]."

On the other hand, in Dormitory Authority-New York v. RLI Ins. Co., supra, where the insurance policy at issue provided that "[t]his insurance does not apply to 'bodily injury' … arising out of ongoing operations described in the Schedule of this endorsement' and the schedule, in turn, included "[e]xterior work above ground level, interior work over 15 feet above the floor, whether performed by the insured or by subcontractors on the insured's behalf," and the plaintiff, an electrical contractor, was injured when a reel of cable he had brought to the roof of the building rolled down a flight of stairs and crushed his leg, the court held that the insurer had not met its prima facie burden of demonstrating that the underlying plaintiff's work, which consisted of replacing cables in the library, was "exterior work above ground level, and that the work fell outside of the scope of the exclusion. Accordingly, the insurer was obligated to defend and indemnify its insured in the underlying action.

In Long Island Rail Road Co. v. New York Marine and General Ins. Co., supra, the underlying plaintiff alleged that she was injured by an escalator at the LIRR Babylon Station. In affirming the grant of summary judgment in favor of LIRR and against New York Marine, to the effect that it was held to be obligated to defend or indemnify its insured, the court observed that LIRR had met its prima facie burden of establishing that the scope of the subject insurance policy covered liability for "bodily injury" or "property damage" that was "caused, in whole or in part, by [the escalator company] at the location designated," and that the amended complaint and bill of particulars of the underlying plaintiff alleged, inter alia, that the injuries sustained by the plaintiff were caused by a defective escalator at an LIRR facility, as well as the negligent operation and maintenance of the escalator. The insurer failed to show that there were triable issues of fact as to whether any acts or omissions by the insured were a proximate cause of the alleged injuries in the underlying action. Thus, the court held that the insurer was obligated to defend LIRR (an additional insured) in the underlying action.

Most recently, in New York Marine and General Ins. Co. v. Eastman Cooke & Assoc., 198 A.D.3d 601 (1st Dept. 2021), the court affirmed the grant of summary judgment to the insured on the issue of defense and indemnification in a property damage action because the insurer failed to show that, as a matter of law, there was no possible factual or legal basis on which it might eventually be obligated to indemnify its insured under any provision of the policy. See also First Mercury Ins. Co. v. Preferred Contractors Ins. Co., 190 A.D.3d 586 (1st Dept. 2021) ("At this stage, the pleadings are sufficient to allege, and the documentary evidence does not conclusively refute, that Lloyd's named insured proximately caused the underlying accident, and thus that under the policy language [citations omitted] there is a reasonable possibility of coverage that could trigger at least a duty to defend").

Jonathan A. Dachs is an attorney practicing in New York City. A frequent lecturer and writer on Insurance Law issues, he is the author of New York Uninsured and Underinsured Motorist Law & Practice (LexisNexis/Matthew Bender 2016-2021).