A New York and New Jersey Lawyer Who Represents Policyholders and Beneficiaries in Life Insurance Denial Cases

The New York Court of Appeals, in Cragg v. Allstate, recently had occasion to consider the scope of an exclusionary clause in a homeowner’s policy in the compelling context of a lawsuit brought after the accidental drowning of a three-year-old girl, deciding that her father was entitled to a wrongful death award.

Three-year old Kayla Cragg drowned accidentally in her grandparent’s swimming pool. At the time, she and her mother were living with the grandparents, who had a homeowner’s insurance policy issued by Allstate. Under the terms of the insurance policy, Kayla was an insured person because she was a resident of the household who was related to the policyholders.

A lawsuit for wrongful death and conscious pain and suffering was commenced against the mother, who also resided in the home with Kayla. She defaulted and judgment was entered for $150,000 for wrongful death and $150,000 for conscious pain and suffering. New York has a terrible wrongful death law that only provides for economic loss and loss of services; as such, cases involving children and the elderly are limited in value and generally awards do not exceed $500,000. Allstate disclaimed coverage for the death under “Coverage X [i] Family Liability Protection” which states “[w]e do not cover bodily injury to an insured person… whenever any benefit of this coverage would accrue directly or indirectly to an insured person.”

The Court of Appeals noted that exclusionary clauses in insurance policies, to the extent they are ambiguous, as was the case with the term “benefit” which was undefined, are to be construed narrowly. The court concluded that the term “benefit” “must mean something other than coverage itself,” because otherwise, the benefit of coverage itself would always trigger the exclusion, and of course, the purpose of the coverage is to protect the homeowner. The court ultimately found that the term “benefit” must mean “proceeds paid under the policy.”

The exclusion, as written, failed to bar payment to a non-insured plaintiff, here the father of the child who served as administrator of the estate. The plaintiff cleverly limited the appeal to the wrongful death claim which inures to survivors, discarding the pain and suffering claim which belongs to the decedent’s estate and which would not have been covered.

The lower courts had previously found for Allstate. This case is an example of the Court of Appeals, led by Chief Judge Jonathan Lippman who authored the opinion, carefully analyzing the policy language and the claim made to arrive at a just result. It also shows how the archaic wrongful death statute needs to be changed so as to provide compensation to survivor’s for grief suffered for the loss of a loved one.


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