Claim Not Within Coverage Clause Because of a Specific Policy Exclusion
In Zappone v. Home Ins. Co. (55 NY2d 131), an insurer's failure to timely disclaim coverage pursuant to former Insurance Law 167 (which has been superseded by Insurance Law 3420 [d]), did not preclude insurer from later denying liability on the ground that the insurance agreement itself does not cover the particular automobile involved in the accident.
The Court of Appeals contrasted the situation where a denial of liability by the insurer is based upon a policy exclusion and a breach of a policy condition, which would require the insurer to make a timely notice of disclaimer, as distinguished from a situation where an insurer claims no contractual relationship with respect to the subject vehicle and incident (Zappone, at 136-137).
The Court concluded that the Legislature did not intend to require notice under Insurance Law 3420 (d) when there never was any insurance in effect and intended to cover only situations in which a policy of insurance would otherwise cover the particular accident but is claimed not to cover it because of an exclusion in the policy (Zappone, at 138).
The Court was concerned with burdening insurers with uncovered claims, which rationale was logically extended by the Court in Central Gen. Hosp. v. Chubb Group of Ins. Cos. (90 NY2d 195) to apply to no-fault matters under Insurance Law 5106 (a) as they pertain to threshold coverage matters.
"In Zappone, the policy's coverage clause at the outset conditioned recovery on liability 'arising out of the ownership, maintenance or use of a covered or a non-owned automobile'.
Because the automobile involved in the accident was owned by a family member and was not within the coverage clause, we concluded that there was never a contractual relationship between the carrier and the claimant giving rise to any duty, including the statutory duty to timely disclaim.
We explicitly distinguished the situation where a claim would be covered but for a specific policy exclusion, explaining that 'the carrier must deny coverage on the basis of the exclusion if it is not to mislead the insured and the injured person to their detriment' (Zappone v. Home Ins. Co., supra, 55 NY2d, at 136)." (Matter of Worcester Ins. Co. v. Bettenhauser, 95 NY2d 185, 189.)