A property owner filed a claim with its insurance carrier after incurring some $183,000 in structural damage, triggered by construction, underpinning and shoring activities which had occurred on an adjoining parcel. Citing to certain policy exclusions, Greater New York Mutual Insurance Company disclaimed coverage and litigation eventually ensued. On motion, the New York County Supreme Court found in the insurer's favor and dismissed the owner's case, since the policy's "settling, cracking" exclusions precluded a recovery. The judge could discern no "meaningful difference" between the building's "settling," which was excluded from coverage, and "shifting," which was an encompassed event.
On appeal, the Appellate Division, First Department, looked to a Webster's dictionary for guidance and disagreed with the Supreme Court's assessment of the case:
Contrary to the motion court's conclusion, the words "shifting" and "settling" have different and distinct meanings. The word "settle," in the context of a fixed object such as a building or structure, means "to sink gradually to a lower level: SUBSIDE"...In contrast, "shift" means "a change in place or position"...Had [the insurance company] intended to exclude damage caused by "shifting," it should have said so....The appellate court also rebuffed the insurer's attempt to rely upon the policy's "Negligent Work exclusion," since neither the owner nor its agents were responsible for the activities which led to the damage in question. As the court noted:
To apply the negligent work exclusion to negligent work performed by persons other than the insured or those acting on its behalf or to work on other than the insured premises would require a strained and irrational interpretation of the exclusion. The exclusion does not refer to external forces generated by the activities of third parties that cause damage to the insured premises. The only reasonable explanation of the negligent work exclusion is that it applies to negligent work by or on behalf of the insured in planning, designing or constructing the insured building, which results in damage to the building.Since the policy's wording did not to exclude acts caused by third parties, the Appellate Division construed that omission "in favor of the insured and against the insurer, the drafter of the policy language" and reinstated the owner's case.
Do you get the sense that the insurer will be shifting to a settlement?
For a copy of the Appellate Division's decision in 242-44 E. 77th St., LLC v. Greater N. Y. Mutual Insurance Co., please click on the following link: