New York Court Finds Insured v. Insured Exclusion Ambiguous

The New York Supreme Court, Appellate Division, applying New York law, has held that a duty to defend was not precluded by the terms of an Insured v. Insured exclusion because the exclusion did not state whether an employee, like the plaintiff in the underlying action, constituted an “insured” for purposes of applying the exclusion. Boro Park Land Co., LLC v. Princeton Excess Surplus Lines Ins. Co., 32 N.Y.S.3d 651 (N.Y. App. Div. June 15, 2016). In so holding, the court concluded that the Insured v. Insured exclusion was ambiguous.

The owner of a building was an additional insured under a Senior Living Professional Liability, General Liability, and Employee Benefits Liability insurance policy issued by the insurer. An employee brought suit against the insured, alleging that she was injured on the premises. The insured tendered the claim to the insurer, and the insurer denied coverage based on the Insured v. Insured exclusion in the policy. The Insured v. Insured exclusion precluded coverage for “[a]ny ‘claim’ made by or for the benefit of, or in the name or right of, one current or former insured against another current or former insured.” The building owner filed suit against the insurer, and the trial court held that the insurer was obligated to defend and indemnify the insured in the underlying action. The insurer appealed.

The appellate court affirmed, concluding that the insurer had a duty to defend and that coverage was not precluded by the Insured v. Insured exclusion. According to the court, it was not clear from the language of the Insured v. Insured exclusion whether the plaintiff in the underlying case, an employee of the named insured, constituted an “insured” for purposes of applying the exclusion. As such, the appellate court stated that the provisions of the Insured v. Insured exclusion “are ambiguous and subject to more than one interpretation.” Accordingly, the court held that the insurer had a duty to defend.