A New York court has ruled Great American Insurance must cover a $5–50 million condo contamination claim, clarifying excess policy obligations for commercial insurers.
The Appellate Division, First Department, delivered its decision on August 21, 2025, in a dispute between Cobblestone Lofts Condominium and Great American Insurance Company. The case centers on whether Great American is required to provide excess coverage for a lawsuit alleging that unintended water and moisture infiltration caused toxic contamination in a Manhattan condominium unit. The potential damages in the underlying action are substantial, ranging from $5 million to $50 million – well above the floor of the Great American excess insurance policy.
Cobblestone Lofts, facing significant liability, sought a declaration that Great American was required to provide coverage under its policy. Great American denied the claim, issuing a “direct, definitive notice” that stated “a breach of contract is not an accident and, therefore, does not constitute an ‘occurrence’ under the Primary Policy or Umbrella Policy,” and that the “Primary Policy excludes coverage for breach of contract.” Great American advised Cobblestone Lofts that it would close its file on the matter.
The court rejected Great American’s arguments. It found that a justiciable controversy existed because the potential liability in the underlying action could implicate the excess insurance coverage, even before any award of damages or settlement. The court noted that the Great American policy covers liability for bodily injury and property damage “that takes place during the Policy Period and is caused by an ‘occurrence’ happening anywhere.” The policy defines “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The court determined that the continuous exposure to harmful conditions alleged in the underlying action fit within this definition, even if the exposure resulted from breaches of contract or statutory duties by the insured.
The court also addressed the contractual liability exclusion in Admiral Indemnity Company’s primary policy, which Great American’s policy follows. The exclusion applies to claims for bodily injury or property damage that the insured is obligated to pay “by reason of the assumption of liability in a contract or agreement.” The court clarified that this exclusion applies when the insured assumes liability through an indemnification agreement, which was not at issue in this case.
As a result, the court affirmed the lower court’s decision, declaring that Great American Insurance Company will be obligated to indemnify Cobblestone Lofts Condominium for any liability imposed in the underlying action that exceeds the limits of the Admiral Indemnity Company policy and falls within the limits of the Great American policy. The decision is uncorrected and subject to revision before publication in the Official Reports.
For insurance professionals, this case highlights the importance of policy language and the scope of coverage for continuous or repeated exposure to harmful conditions in commercial property insurance disputes. The ruling clarifies that insurers may be required to provide coverage even when the alleged damages arise from breaches of contract or statutory duties, as long as the policy’s definition of “occurrence” is met.
