Sunday, April 15, 2018

Burden of Proving Exception to Exclusion Falls on Insured

Corbel Constr. Co. v Arch Specialty Ins. Co.
(2nd Dept., 4/11/2018)

Not much factually to see here.  General contractor (Corbel) sues its own GL insurer (Arch) for defense and indemnification coverage in an underlying personal injury action.  Both parties move for summary judgment.  Supreme Court grants Corbel's motion and denies Arch's cross motion.  Arch appeals, arguing that Supreme Court erred because Arch established on its cross motion that a policy exclusion applied, and Corbel failed to create a question of fact regarding an exception to that exclusion.

In REVERSING Supreme Court's order and granting summary judgment to Arch, the Second Department agreed with Arch and reiterated the well-established principle that while insurers bear the burden of establishing the applicability of policy exclusions, insureds bear the burden of establishing exceptions to those exclusions:
"In determining a dispute over insurance coverage, [courts] first look to the language of the policy" (Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d 208, 221). Although the insurer has the burden of proving the applicability of an exclusion (see Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 311), it is the insured's burden to establish the existence of coverage (see Lavine v Indemnity Ins. Co., 260 NY 399, 410). Thus, where "the existence of coverage depends entirely on the applicability of [an] exception to the exclusion, the insured has the duty of demonstrating that it has been satisfied" (Borg-Warner Corp. v Insurance Co. of N. Am., 174 AD2d 24, 31). In support of its cross motion, Arch established its prima facie entitlement to judgment as a matter of law by demonstrating the applicability of an exclusion in Corbel's policy (see Platek v Town of Hamburg, 24 NY3d 688, 694; Alvarez v Prospect Hosp., 68 NY2d 320, 324-325).
In opposition to Arch's prima facie showing, Corbel failed to raise a triable issue of fact regarding the applicability of an exception to the exclusion (see Conlon v Allstate Veh. & Prop. Ins. Co., 152 AD3d 488, 491; Copacabana Realty, LLC v Fireman's Fund Ins. Co., 130 AD3d 771, 772; Broome County v Travelers Indem. Co., 125 AD3d 1241, 1244-1245; State Ins. Fund v Hermitage Ins. Co., 256 AD2d 329, 330). Accordingly, the Supreme Court should have granted Arch's cross motion for summary judgment declaring that it is not obligated to defend or indemnify Corbel in the underlying action, and should have denied Corbel's motion for summary judgment declaring that Arch is so obligated.
To review:

BURDENS OF PROOF (in ALL types of coverage disputes)
  • Inclusionary terms (grant of coverage) -- INSURED
  • Exclusionary terms                                -- INSURER
  • Exceptions to exclusions                       -- INSURED
Who remembers my light switch object metaphor from the Mura & Storm annual New York Coverage seminars?  
  • Inclusionary terms (grant of coverage) -- Switch ON
  • Exclusionary terms                                -- Switch OFF
  • Exceptions to exclusions                       -- Switch back ON
Insureds always have the burden (from the loss facts) of turning the light switch on.  Or back on, as the case -- like this one -- may be.    

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