Before diving into the details of The Lab, LLC v. Travelers,1 I’d like to thank a friend of Merlin Law Group for alerting us to this new development in New York case law. While Merlin Law Group does blog a lot, we don’t get to every topic that is worth writing about. We appreciate when readers of our blog send us recently decided cases or specific topics they would like to learn about. If you have a topic you would like discussed please forward it to the Merlin attorney in your jurisdiction.
The Lab, a recent Federal case out of the Southern District of New York, is a claim involving both the insured’s carrier (Travelers) and broker (Nathan Butwin Company). The lab hired NBC to obtain insurance coverage that would cover business interruptions caused by “any loss of power” or “any loss of use or occupancy” at The Lab’s business premises. NBC procured a policy for The Lab with Travelers. Thereafter, Superstorm Sandy struck New York causing damage to the premises and The Lab timely submitted a claim to Travelers. Travelers denied coverage and The Lab brought suit.
The case centers on The Lab’s motion to remand the case from Federal Court back to New York Supreme Court. Travelers filed their opposition, citing to Pampillonia v. RJR Nabisco,2 stating NBC fraudulently joined the action to defeat federal jurisdiction.3 Therefore, the Court had to evaluate The Lab’s claim against NBC under New York law.
As the court referenced, “[i]nsurance agents have a common-law duty to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so.”4 Prior decisions made it mandatory for the plaintiff to establish that it made a specific request for a certain coverage not provided in the policy and that a general request for coverage does not suffice.
The court, in finding for The Lab, and therefore remand to state court, noted:
The Lab identified a specific type of coverage as well as certain contingencies that the policy should cover. Thus, the Court find that the request was specific enough that The Lab could at least possibly recover against Butwin for its alleged failure to provide the coverage The Lab requested. As a result, Travelers has not met its burden of establishing that there is “no possibility” The Lab could state a claim against Butwin under New York law…
Before you get excited about a potentially pro-insured decision, remember this decision was in New York federal court which is not binding on any New York state court. It can, however, be persuasive to a New York state court considering New York state law was used in the decision. Judge Keenan’s decision seemingly broadened the language that can be used by an insured to put the broker on notice of the desired coverage, which then puts the onus on the broker/agent to procure the correct coverage.
I leave you with a quote from another baseball legend and hall of famer Tony Gwynn, regarding his feelings towards responsibility, “When you sign your name on the dotted line, it’s more than just playing baseball. You have a responsibility to make good decisions and show people how things are supposed to be done.”
1 The Lab, LLC. v Travelers Property Casualty Company of America and Nathan Butwin Company, Inc., No. 14 Civ. 7773 (S.D.N.Y. Jan. 21, 2016).
2 Pampillonia v. RJR Nabisco, Inc., 138 F.3d 459, 461 (2d Cir. 1998).
3 One way to obtain federal jurisdiction is for the amount in controversy to exceed $75,000 and every plaintiff is from a different state from every defendant (total diversity) involving a state-law claim (breach of insurance contract).
4 Am. Bldg. Supply Corp. v. Petrocelli Grp., Inc., 979 N.E.2d 1181, 1184 (N.Y. 2012).