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July 12, 2019

Second Circuit Win for United Financial Covered by Law360

Larry Rabinovich, transportation team leader, successfully obtained a reversal of a decision by the US District Court for the Eastern District of New York relating to a non-trucking policy issued by client United Financial Casualty Company (UFCC). The Second Circuit agreed with UFCC that it had not waived its right to deny coverage on the basis that the covered rig was being used in the business of the lessee motor carrier. Since, under NY law, a contingent type policy is enforceable only if other insurance is collectible, UFCC was not in a position to decline coverage and had not violated the requirement of Insurance Law 3420(d)(2) requiring prompt declinations.

As reported in Law360, the district court decided UFCC did not promptly disclaim liability coverage to truck driver Juan Pineda; UFCC sent Pineda a reservation of rights letter, but New York State requires an insurer to decline coverage to its insured or file a declaratory judgment action once it is aware of grounds that would justify a declination. UFCC was aware that Country-Wide had made a filing with the USDOT for the motor carrier but did not view that as a basis for declining. After issuing the reservation of rights, UFCC made multiple attempts to reach out to Country-Wide, repeatedly inquiring whether Pineda was covered, which turned on whether the Country-Wide policy covered the leased rig. The Second Circuit agreed with UFCC that until it knew that Country-Wide would cover the driver, the provisions of Insurance Law 3420 were not triggered.

In a statement to Law360, Rabinovich noted that “[u]ntil the existence of that other coverage was confirmed, my client was not in [a] position to decline coverage.” He observed that the court also hinted it agrees with UFCC that Section 3420(d)(2) sets out requirements as between the insurer and its insured, and it is not appropriate for one insurer to argue another insurer waited too long to decline coverage.

Read additional coverage of this case by Business Insurance and Lexology.

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