Pre-Inception Property Damage, Collapse and Late Notice

Pars Bronx Realty, LLC v. Wesco Ins. Co., Index No. 450191/2017 (New York Co. Sup. Ct. June 20, 2019)

In this dispute involving a commercial building, the insured sought $2.5 million for property damage and $2.5 million for bad faith. Wesco Insurance Company argued three defenses in favor of summary judgment: 1) the damage commenced before the policy incepted, 2) the damage (cracking, leaning, settling, etc.) was excluded from coverage and 3) the insured breached the policy’s notice condition by providing notice 46 days after the loss was discovered. The insured argued that: 1) Wesco’s loss control report proved that there was no pre-inception damage, 2) the damage only applied if there was a collapse, and the insured should not have to wait for a collapse to occur before coverage was triggered, and 3) it did not notify Wesco earlier because it needed to shore-up the building.

The court ruled in favor of Wesco on all three grounds.

First, the court found that the testimony of the insured’s engineer (that he could not identify any damage that occurred within a year before his inspection) conclusively proved that the damage commenced before the policy incepted. Second, the court ruled that the engineer’s admission that the damage was basically deterioration and cracking established as a matter of law that the damage was excluded. Third, the court held that the 46-day delay was longer than in other cases, and found no excuse why the insured did not simply call Wesco before or after he called his contractor or engineer. The insured’s contention that Wesco needed to prove prejudice in connection with the late notice claim was rejected, with the court finding that requirement applicable only to liability cases (but noting that Wesco would have wanted to see the building before the insured erected shoring and otherwise disturbed the scene, implying there was in fact prejudice).

Wesco Insurance Company was represented by partner Kevin F. Buckley.


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