New York's Disclaimer-of-Coverage Statute and Bodily Injury Claims from Mold Exposure: is Mold Exposure an "Accident?"
January, 2003
Under New York Insurance Law §3420(d), a liability insurer in New York disclaiming coverage for accidental bodily injury on the basis of a policy exclusion must provide the insured with a timely and specific written notice of disclaimer:
If under a liability policy delivered or issued for delivery in this state, an insurer shall disclaim liability or deny coverage for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state, it shall give written notice as soon as reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant.
This statute has been judicially analyzed many times over the years, but never in the context of a bodily injury allegedly caused by mold exposure. The question thus arises: Does the statute apply in that context? If the mold exposure in question is “accidental,” the answer would appear to be “yes.”
Courts interpreting §3420(d) have generally held that an “accident” is simply an unexpected, unusual, or unforeseen injury-causing event: “[R]egardless of the initial intent or lack thereof as it relates to causation, or the period of time involved, if the resulting damage could be viewed as unintended by the fact finder the total situation could be found to constitute an accident.” McGroarty v. Great American Ins. Co., 368 N.Y.S.2d 485, 490 (N.Y. 1975). Thus, in American Ref-Fuel Co. of Hempstead v. Employers Ins. Co. of Wausau, 705 N.Y.S.2d 67 (N.Y. App. Div. 2000), for example, the New York Appellate Division held that §3420(d) applied where the claimant’s bodily injury was caused by long-term respiratory exposure to landfill ash because “[i]njury results from an accident when, from the point of view of the insured, the event was unexpected, unusual, or unforeseen. An unintended event is considered accidental.” See also: Matychak v. Security Mut. Ins. Co., 581 N.Y.S.2d 453 (N.Y. App. Div. 1992) (plaintiff’s injury considered “accidental” where it resulted from long-term ingestion of drinking water contaminated by oil spill on neighboring property). But see: TIG Ins. Co. v. Town of Cheektowaga, 142 F. Supp. 2d 343 (W.D.N.Y. 2000) (bodily injuries caused by pesticide-laden landfill runoff were not “accidental” for purposes of §3420(d) because the insured intentionally discharged pesticides into landfill despite fact that hazardous waste disposal in landfill was not permitted).
The consequences to an insurer for failing to comply with §3420(d) are dire. “Where...the policy would provide coverage but for a policy exclusion, the insurer must disclaim coverage [pursuant to §3420(d)], and the failure to do so in a reasonably timely manner estops the insurer from disclaiming coverage based on the exclusion.” Hamilton v. City of New York, 681 N.Y.S.2d 563, 564 (N.Y. App. Div. 1998). We accordingly advise New York insurers presented with bodily injury claims caused by mold exposure to follow the strictures of §3420(d) until the New York courts determine that such compliance is unnecessary because mold exposure is not “accidental.” We will continue to monitor this important area of mold law and provide our readers with updates as they occur.
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