Personal Umbrella Insurer Found to Have Standing to Commence Declaratory Judgment Action to Challenge Disclaimer of Homeowners Insurer

HOMEOWNERS – PERSONAL UMBRELLA – DECLARATORY JUDGMENT ACTION – STANDING
RLI Ins. Co. v. Steely
(2nd Dept., decided 8/4/2009)

RLI Insurance Company insured William Steely under a personal umbrella policy.  Steely had a homeowners policy with New York Central Mutual Fire Insurance Company.  Steely sought liability insurance coverage for a boating accident under both policies.  Based on its conclusion that Steely owned the boat in question on the accident date, NYCM denied coverage under Steely's homeowners based on a policy exclusion.  RLI then commenced this declaratory judgment action to challenge NYCM's denial, contending that Steely did not own the boat on the date of the accident, and that any coverage provided by RLI's umbrella policy was excess to the coverage provided by NYCM's homeowners policy.  NYCM moved to dismiss the action pursuant to CPLR Rule 3211(a)(3), arguing that RLI lacked legal standing to challenge NYCM's coverage denial.  Westchester Supreme granted NYCM's motion, and RLI appealed. 

In REVERSING the order dismissing RLI's complaint, the Second Department held:

We find that the plaintiff has standing to challenge NY Mutual's disclaimer of coverage to its insured. "A plaintiff need not be privy to an insurance contract to commence a declaratory judgment action to determine the rights and obligations of the respective parties, so long as the plaintiff stands to benefit from the policy" (Mortillaro v Public Serv. Mut. Ins. Co., 285 AD2d 586, 587). Here, the plaintiff clearly stands to benefit from NY Mutual's policy.