O&B Successfully Obtains Summary Judgment Upholding the Validity of Insurance Policy Modifications
May 2005

By: Michael D. Brown, Lauren M. Pape

On May 10, 2005, Michael D. Brown was successful in obtaining partial summary judgment before the Honorable Thomas P. Griesa, U.S.D.J., former Chief Judge for the Southern District of New York. The question presented to the Court was whether modifications to an insurance policy between an insurer and its insured which retroactively reduced the insured's policy limits were valid and enforceable.

The insured argued that the retroactive reduction of insurance limits was void as against public policy pursuant to the ruling by the Second Department of the New York Appellate Division in Ingrassia v. Medical Malpractice Insurance Association, 555 N.Y.S.2d 876 (2nd Dep't 1990). On behalf of the insurer, Mr. Brown effectively argued that the modification, which was supported by adequate consideration, and requested and agreed to by the insured in an effort to reduce premium payments, was enforceable under New York law irrespective of the potential implications to injured tort claimants. This argument was based in part on a recent decision of the New York Court of Appeals in which it was determined that injured claimants do not have the right to bring a direct action against an insurer prior to obtaining a judgment against the insured which remains unsatisfied for thirty (30) days pursuant to New York Insurance Law section 3420. Lang v. Hanover Ins. Co., 3 N.Y.3d 350 (N.Y. 2004) (O & B participated in the Lang case as amicus curie).

Mr. Brown's arguments were adopted by Judge Griesa who ruled that in predicting what the New York Court of Appeals would rule if presented with the issue, that the trend in New York Courts recognized that injured claimants have no rights in an insurance policy prior to fulfilling the requirements of New York Insurance Law section 3420.

This ruling is particularly significant in that it recognizes the ability of an insurer and its insured, for adequate consideration and legitimate business purposes to modify or cancel their insurance coverage when the State does not require that insurance be maintained.

(Prior results do not guarantee a similar outcome.)