In a decision that was handed down on October 20, New York's Appellate Division, Second Department (which covers Kings, Queens, Nassau, Suffolk and Westchester Counties) re-affirmed an important, but largely unknown, rule: unlike auto policies, which are heavily regulated by both statute and the Insurance Regulations, the insurance companies writing commercial liability policies are free to limit their own liability by excluding from coverage any claims arising out of a personal injury or construction site accident that occurs to the contractor or owner's employee.

While I find persuasive the logic behind this particular decision ("[W]hen statutes and Insurance Department regulations are silent, [courts] are reluctant to inhibit freedom of contract by finding insurance policy clauses violative of public policy"), that in turn begs the question: why should and/or did the legislature go to such lengths to distinguish - and regulate - auto and truck insurance as well as fire insurance coverage?

I believe that the answer lies in recognizing that cars and trucks are dangerous instrumentalities, and the legislature wanted to ensure that there would be financially responsible entities available to compensate people who were legitimately and seriously injured through someone else's negligence. In a commercial context on the other hand, Workers' Compensation insurance is available to compensate the injured employee, rendering moot the need for additional regulations to forbid commercial liability insurers from excluding coverage for such incidents.

That being said, and at the risk of redundancy, you should never accept an insurer's disclaimer of coverage at face value; since the specific steps an insurer must take to properly disclaim coverage are highly regulated and technical, you have little to lose by challenging the disclaimer. Conversely, if you don't, you are guaranteed to lose out on your chance to have your insurance cover your losses.
Jonathan Cooper
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Non-Compete, Trade Secret and School Negligence Lawyer
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