NEW YORK LAW JOURNAL - April 1998

INSURER'S EFFORT TO DENY COVERAGE IS REBUFFED.
By Martin Fox

The Appellate Division, First Department, yesterday refused to allow an insurer to rely on a policy exclusion to escape liability for business losses suffered by a Bronx bagel shop that was ordered by a city agency to vacate its building because of "imminent danger' following a fire. The fire destroyed much of the structure but not the shop itself.

The unanimous court, in a ruling of apparent first impression on the appellate level, rejected the insurer's contention that it was to responsible for the losses because the policy specifically excluded any loss based upon "the enforcement of any ordinance or law." The decision will be published Monday.

Justice Betty Weinberg Ellerin, writing for the four-Justice panel, found that the vacate order issued by the Department of Buildings was not "a contributing cause of the loss."

"In reality," Justice Ellerin emphasized, "the order served merely as a confirmation of the circumstances regarding the actual cause of the loss, i.e., the fact that the premises had been rendered structurally unsound and unfit for continued use as a result of the fire." Throgs Neck Bagels v. GA Insurance Company of New York.

"It cannot logically be claimed that plaintiff would not have vacated a building rendered structurally unsound but for an order from the Department of Buildings. On the contrary, when the order was served, the need to vacate the premises and all the immediate and consequential losses stemming from the fire and explosion, both direct and indirect, had already been 'caused.'"

The plaintiff had brought a claim for $127,500 for property damage and $100,000 for business interruption losses as the result of the building fire ignited when 1,500 gallons of gasoline spilled into the street after a tanker collided with an automobile. The fire and an explosion killed five people and destroyed three of six stores---but not the bagel shoo---at the corner of East Tremont Avenue and Bruckner Boulevard nearly seven years ago.

The appellate panel affirmed the decision by Bronx Supreme Court Justice Douglas McKeon granting the plaintiff summary judgement to denying GA Insurance's claim that the policy's exclusion clause cleared it of liability.

Justice Ellerin pointed out that to accept the insurer's position " would be to render the underlying coverage nugatory in a host of cases where it would reasonably be expected to apply." To hold that the law or ordinance exclusion applies under circumstances such as here present would frustrate the underlying purpose of the policy."

Concurring in the decision were Justices Joseph P. Sullivan, Ernst H. Rosenberger and Eugene Nardelll.

The plaintiff was represented by Weg & Myers, with Molly Klapper of counsel; the insurer by Mount, Cotton & Wollan, with Renee M. Plesser of counsel and Arthur N. Brook on the brief.