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02/13/01:         LANE v. SECURITY MUTUAL INS. CO.

New York Court of Appeals

Fire Insurance Provision that Denies Coverage to Innocent Insured Violates New York Law

The issue on appeal was whether a fire insurance policy that excludes coverage for the intentional fire set by “an insured” violates the standard fire insurance policy provisions contained in Insurance Law § 3404 when applied to exclude coverage to an innocent insured. New York's high court concludes that it does.  The subject exclusion impermissibly restricts the coverage mandated by statute and afforded the innocent insured.  The standard statutory policy provides that recovery can be excluded “for loss occurring * * * while the hazard is increased by any means within the control or knowledge of the insured”.  The standard policy is the minimum level of coverage permissible for an insurance company to issue.  The exclusion ruled on by the court was specifically written to overcome case law in the mid-1980s holding that arson by one insured does not bar recovery by any other insured absent specific exclusionary language to that effect.

 

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