Additional Insureds Can Intervene to Try to Defeat Suit to Rescind Policy
Post 5170
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Posted on August 18, 2025 by Barry Zalma
The case involves Accelerant Specialty Insurance Company (“Accelerant”) seeking a declaratory judgment against Big Apple Designers, Inc. (“Big Apple”), declaring that the insurance policies issued by Accelerant to Big Apple are invalid and do not create a duty to defend or indemnify Big Apple in several personal injury actions currently pending in New York State Supreme Court. M&R Construction Group, Inc. (“M&R”) and Continental Indemnity Company (“Continental”) filed a motion to intervene, asserting that M&R is entitled to coverage from Accelerant as an additional insured.
In Accelerant Specialty Insurance Company v. Big Apple Designers, Inc., No. 24-CV-7793 (ARR) (RML), United States District Court, E.D. New York (August 6, 2025) the USDC ruled to allow intervention to dispute the claim of rescission.
BACKGROUND
Indemnification and Duty to Defend:
The court discussed the distinction between an insurer’s duty to defend and its duty to indemnify. The duty to defend is triggered by the initiation of a claim under which the insured may eventually be found liable, while the duty to indemnify is contingent upon a liability finding.
INTERVENTION:
The court granted the motion to intervene by M&R and Continental, allowing them to assert counterclaims against Accelerant. The court found that intervention will promote efficiency and prevent inconsistent judgments to allow proper defense of Accelerant’s claim of rescission.
DECLARATORY JUDGMENT AND RESCISSION:
Accelerant sought a declaratory judgment that the insurance policies were void due to Big Apple’s material misrepresentations in its insurance application. The court discussed the principles of rescission and the impact of misrepresentations on the validity of insurance policies but did not rule on the issue.
COURT’S DECISION:
The court granted the motion to intervene by M&R and Continental, allowing them to assert their proposed counterclaims against Accelerant, with the exception of any claims seeking indemnification. The court declined to exercise jurisdiction over M&R’s claim for indemnification under the Declaratory Judgment Act, as liability has not yet been determined in the underlying Yunga Action.
ANALYSIS
Accelerant’s first and second claims both sougt declaratory judgments that disclaim Big Apple’s entitlement to coverage under the Accelerant Policies. The first claim asserts a breach of contract-that Big Apple’s misrepresentations in its insurance application breached the Accelerant Policies’ contractual warranties.
Intervention as a Matter of Right
To establish intervention as of right pursuant to Rule 24(a)(2), an intervenor must show that (1) the motion is timely; (2) the applicant asserts an interest relating to the property or transaction that is the subject of the action; (3) the applicant is so situated that without intervention, disposition of the action may, as a practical matter, impair or impede the applicant’s ability to protect its interest; and (4) the applicant’s interest is not adequately represented by the other parties.
The decision to permit intervention is not unlimited, however. Intervenors seek a declaration that Accelerant owes a duty to defend and indemnify M&R in the Yunga Action. As the Second Circuit has explained, even in circumstances when a declaratory judgment would serve a useful purpose in clarifying and settling the legal relations in issue, district courts retain broad discretion to decline jurisdiction under the DJA.
An insurer’s duty to defend an additional insured is triggered by the initiation of a claim under which its insured may eventually be found liable. It is not contingent upon a liability finding.
DECLARATORY JUDGMENT AND RESCISSION:
The court concluded that the named insured did not represent the interests of the additional insured in disputing the rescission and so granted leave to intervene.
ZALMA OPINION
Rescission, if granted, puts the parties back to the place where they were before the inception of the policy. The court noted that the named insured was not interested, nor were they trying to defeat the rescission, but that the additional insured who intervened would put in the effort so the court granted intervention and left the issue of rescission for a more detailed consideration. If Accelerant can prove the policy was obtained by fraud or material misrepresentation the policy will be void from its inception and neither the named nor the additional insureds will be allowed defense or indemnification.
You can find a permanent public version of the document here: https://public.fastcase.com/jaEE2PXzRXmZ99jOLMt1Il4uCbo8ZFJ5okOMj4HOg56hikcK0S3TPNmeOPNAlT7%2fWbJynHYMpBbNuraQPgltZA%3d%3d
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Post 5219
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An Insurance claims professionals should be a person who:
Can read and understand the insurance policies issued by the insurer.
Understands the promises made by the policy.
Understand their obligation, as an insurer’s claims staff, to fulfill the promises made.
Are competent investigators.
Have empathy and recognize the difference between empathy and sympathy.
Understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals.
Understand how to repair damage to real and personal property and the value of the repairs or the property.
Understand how to negotiate a fair and reasonable settlement with the insured that is fair and reasonable to both the insured and the insurer.
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This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry. This statement of my philosophy on claims handling starts with my history as a claims adjuster, insurance defense and coverage lawyer and insurance claims handling expert.
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When I was discharged from the US Army in 1967 I was hired as an insurance adjuster trainee by a professional and well respected insurance company. The insurer took a chance on me because I had been an Army Intelligence Investigator for my three years in the military and could use that training and experience to be a basis to become a professional insurance adjuster.
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