ATLANTIC MUTUAL INSURANCE COMPANY v. Penmark Realty Corporation, et al., Defendants. (2024)

Order, Supreme Court, New York County (Gerald Lebovits, J.), entered on or about October 25, 2023, which, to the extent appealed from as limited by the briefs, granted defendant 40 East 80 Apartment Corporation's (the Co–Op) motion for summary judgment declaring that defendant Greater New York Mutual Insurance Company (GNY) is obligated to defend and indemnify the Co–Op in connection with an underlying action, unanimously affirmed, with costs.

The court correctly granted summary judgment in favor of the Co–Op for defense and indemnification.  The underlying action involved water damage to an apartment in the Co–Op's building.  GNY has the duty to cover the amounts awarded because they were sums that the Co–Op became “legally obligated to pay as damages because of ․ ‘property damage’ ” within the meaning of the policies, which define “property damage” to include not only physical injury to tangible property but also resulting loss of use of that property.  This was sufficient to require GNY to cover alternate living expenses, rent abatement (see e.g. I.J. White Corp. v. Columbia Cas. Co., 105 A.D.3d 531, 532, 964 N.Y.S.2d 21 [1st Dept. 2013];  Hotel des Artistes, Inc. v. General Acc. Ins. Co. of Am., 9 A.D.3d 181, 188, 775 N.Y.S.2d 262 [1st Dept. 2004], lv dismissed 4 N.Y.3d 739, 790 N.Y.S.2d 651, 824 N.E.2d 52 [2004]), and attorneys' fees (see XL Specialty Ins. Co. v. Loral Space & Communication, Inc., 82 A.D.3d 108, 113, 918 N.Y.S.2d 57 [1st Dept. 2011]).

Because attorneys' fees are covered, the court also properly found that GNY must defend the Co–Op in the hearing on attorneys' fees in the underlying action (see generally Frontier Insulation Contrs., Inc. v. Merchants Mut. Ins. Co., 91 N.Y.2d 169, 175, 667 N.Y.S.2d 982, 690 N.E.2d 866 [1997]).

GNY's argument that coverage is unavailable because the Co–Op's liability arose out of a breach of contract claim is unavailing (see e.g. Hotel des Artistes, 9 A.D.3d at 188–189, 775 N.Y.S.2d 262;  cf.  George A. Fuller Co. v. United States Fid. & Guar. Co., 200 A.D.2d 255, 259, 613 N.Y.S.2d 152 [1st Dept. 1994], lv denied 84 N.Y.2d 806, 621 N.Y.S.2d 515, 645 N.E.2d 1215 [1994]).

We decline to reach GNY's argument that the court erred in failing to limit coverage to the 2004–2005 policy period.  The parties agree that this argument may be properly addressed by Supreme Court in the first instance.