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United States: Language of Non-Defamatory Policy – 470 4th Ave. Fee Owner V. Wesco Insurance
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470 4th Ave. Fee Owner, LLC et al v. Westco Ins. Co.2021 WL 6097478 (NYSup.), 2021 NY Slip Op. 32780(U) (Trial Order) (Sup. Ct. NY Co. Dec. 23, 2021)
Plaintiffs have alleged more than $6.1 million in damages for the insurance company’s denial of coverage for a new residential building in New York City that suffered continuous water infiltration. Plaintiffs sued not only the insurance company that issued the policy, but also its parent company.
The plaintiffs alleged that the letter denying coverage was defamatory because it was sent to the plaintiffs’ mortgage company and stated that to the extent that a false date of loss was intentionally provided in the first notice of claim, the claim is prohibited by the fraud provision of the policy. The court held that such statements were not defamatory. The court reasoned: “The defendant merely cited the parts of the policy justifying its disclaimer and cited the facts on which it relied. The truth of the terms of the policy is not capable of meaning defamatory and conditions that satisfy these disclaimer terms are also not defamatory.”
The court also dismissed all claims against the parent company, as it was not a signatory to the insurance contract and no facts were alleged to suggest dominance and control.
This decision is important because it confirms that insurance companies cannot be held liable for defamation by denying a claim based on fraud and by stating the facts on which the denial is based. It also reinforces the well-established rule that a mortgagee has an insurable interest in a policy in which it is named and the right to be notified of coverage decisions.
Partners Kevin F. Buckley and Jodi S. Tesser, and associate Rachel M. Horzempa represented Wesco Ins. Co.
You can read the decision here.
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