In this period of economic uncertainty, with seemingly new sources of significant widespread losses appearing weekly, individuals and businesses find themselves increasingly looking to available insurance for relief. Insurance carriers have received more than 60 million claims since March, and previous weekly claim filing records have been surpassed time and time again. With an unprecedented number of claims has come an unprecedented number of coverage denials—many of which are based on exclusions in policies.
For far too many, the receipt of a denial letter that reasonably describes why insurance is not available is the end of the road. However, the burden that insurance carriers have to meet in denying coverage, particularly when they are relying on an exclusion, is incredibly high. Applying this high burden, New York courts have established that certain common insurance phrases, such as “arising out of,” have precise legal meanings which, when applied, can negate a carrier’s seemingly reasonable basis to disclaim coverage.
The High Burden to Exclude Coverage
Under New York law, courts initially address the right to coverage under an insurance contract as they would any other contract, and unambiguous terms are given their plain and ordinary meaning to assure that each portion of the policy is given force and effect. Lend Lease (US) Const. LMB Inc. v Zurich Am. Ins. Co., 28 N.Y.3d 675, 681–82 (2017); In re Viking Pump, Inc., 27 N.Y.3d 244, 257 (2016). However, where the policy “may be reasonably interpreted in two conflicting manners, its terms are ambiguous, and “any ambiguity must be construed in favor of the insured and against the insurer.” Lend Lease (US) Constr. LMB Inc., 28 N.Y.3d at 682.
