HNRK Coverage Corner
On November 26, 2018, Judge Feuerstein of the EDNY issued a decision in Merritt Environmental Consulting Corp. v. Great Divide Ins. Co., 17-CV-7495, holding that a policy exclusion for claims “arising out of” radioactive contamination did not require proximate causation, but rather “some causal relationship” between the contamination and the claim. In Merritt Environmental, an environmental consulting business sought coverage under a professional liability policy for lawsuits by a client alleging that Merritt negligently failed to identify radioactive contamination in a property. The insurer denied coverage based on an exclusion applicable to claims “arising from" radioactive contamination. Merritt argued that the exclusion did not apply because the proximate cause of the claims was Merritt’s alleged professional negligence, not the underlying radioactive contamination. Magistrate Judge Shields rejected this argument in a report and recommendation issued on October 10, 2018 (the “Report”), finding that the language of the exclusion only required that the contamination be a “but for” cause of the claim. Judge Feuerstein overruled Merritt’s objections and upheld the Report, explaining:
In the context of an insurance policy exclusion, “[t]he New York Court of Appeals has held that the phrase ‘arising out of’ is ‘ordinarily understood to mean originating from, incident to, or having connection with[,]’” Federal Ins. Co. v. American Home Assur. Co., 639 F.3d 557, 568 (2d Cir. 2011) (quoting Maroney v. N.Y. Cent. Mut. Fire Ins. Co., 5 N.Y.3d 467, 472, 805 N.Y.S.2d 533, 839 N.E.2d 886 (2005) (internal quotations and citation omitted)), and “requires only that there be some causal relationship between the injury and the risk for which coverage is provided.” Id. (quoting Maroney, 5 N.Y.3d at 472, 805 N.Y.S.2d 533). Magistrate Judge Shields properly applied a “but for” test to determine, based upon the complaints in the underlying lawsuits and the language of the relevant provisions of the subject Policy, that the “arising out of exclusion” at issue, i.e., the radioactive matter exclusion in the subject Policy, applies and bars coverage for the underlying lawsuits. See Mount Vernon Fire Ins. Co. v. Creative Hous. Ltd., 88 N.Y.2d 347, 350, 645 N.Y.S.2d 433, 668 N.E.2d 404 (1996); Country-Wide Ins. Co. v. Excelsior Ins. Co., 147 A.D.3d 407, 409, 46 N.Y.S.2d 96 (N.Y. App. Div. 2017).
Insurance policies often employ terms of art that have accepted meanings. Here, the phrase, “arising under”, as used in the exclusion connotes but-for causation. By contrast, New York courts interpret the phrase, “caused in whole or in part by” to require proximate causation (See our previous posts here and here).
- Partner
Bradley Nash represents policyholders in insurance disputes and other parties in complex commercial litigation in state and federal courts in New York and across the country. Brad focuses his practice on insurance recovery for ...
Search Blog
Recent Posts
- Is Carbon a “Pollutant”? — The Supreme Courts of Alaska and Hawaii Receive Certified Questions Regarding Scope of Pollution Exclusions in Liability Policies
- Court Rules That D&O Policy’s “Bump-Up” Exclusion Does Not Apply to Merger Transaction
- Eleventh Circuit Rules Insurer Cannot Recoup Defense Costs Under Duty to Defend Policy
- Federal Court Declines to Exercise Jurisdiction Over Insurer’s Declaratory Judgment Action That Raised “Novel Issue of Ohio Insurance Law”
- Bankruptcy Court Lifts Automatic Stay to Permit Officers of Silicon Valley Bank to Access D&O Coverage
- E&O Policy Exclusion Bars Coverage for Negligence Claim Against Law Firm Arising from Third Party’s Misappropriation of Client’s Funds
- New Jersey Appellate Court Holds That Policy’s War Exclusion Did Not Apply to State-Sponsored Cyberattack
- New York Court Discusses Appellate Division Split Over Recoupment of Defense Costs Under a Duty to Defend Policy
- Delaware Law Governs D&O Policy Issued to Delaware Corporation Doing Business Outside the State
- Ohio Supreme Court Rules Computer Software Cannot Be Subject To “Physical Loss” Or “Physical Damage” Under Insured’s Property Insurance Policy
Popular Categories
- Occurrence/Accident
- Duty to Defend
- Insurance Coverage
- D&O Policies
- Pollution Exclusion
- Policy Exclusions
- CGL Policies
- E&O Policies
- Cyber Coverage
- Additional Insured Endorsement
- Business Interruption Coverage
- Construction
- Bad Faith Claims Handling
- COVID-19
- Indemnification and Advancement
- Damages
- Excess Insurance
- Duty to Cooperate
- Advertising Injury
- Rules of Interpretation
- Related Claims
- Personal and Advertising Injury
- Covered Loss
- Insurance Brokers
- Confict of Laws
- Discovery/Disclosure
- Appraisal
- Attorney Fees
- Assignment of Claims
- Disability discrimination
- Implied Covenant of Good Faith and Fair Dealing
- Notice
- Privilege/Work Product
- Priority of Coverage
- Intellectual Property
- Contracts
- Professional Malpractice
- Rescission
- Intervention/Joinder
- Subrogation
- Settlements
- General Business Law
- Unfair Claims Settlement Practices
Archives
- September 2023
- August 2023
- June 2023
- May 2023
- April 2023
- March 2023
- January 2023
- December 2022
- September 2022
- May 2022
- April 2022
- March 2022
- November 2021
- June 2021
- February 2021
- January 2021
- December 2020
- November 2020
- October 2020
- September 2020
- August 2020
- April 2020
- March 2020
- February 2020
- January 2020
- December 2019
- November 2019
- October 2019
- September 2019
- August 2019
- July 2019
- May 2019
- April 2019
- March 2019
- February 2019
- January 2019
- December 2018
- November 2018
- October 2018
- September 2018
- August 2018
- July 2018
- May 2018
- April 2018
- March 2018
- February 2018
- January 2018