Insurance company sends denial of coverage letter to Chester town officials

Chester. In a Nov. 1 letter, third-party administrator Summit Risk Services explains why the town's insurer will not "defend or indemnify the town or its officials" in the multimillion dollar lawsuit brought by the Greens of Chester developer.

06 Nov 2019 | 01:59

Eight former and current town and county officials were sent letters explaining why Chester's insurance company will not defend the town against a multimillion dollar lawsuit brought by the Greens of Chester housing development.

Individual letters, dated Nov. 1, were sent to Supervisor Robert Valentine, former Supervisor Alexander J. Jamieson, building inspector Jim Farr, Orange County Executive Steve Neuhaus, and town board members Ryan Wensley, Cindy Smith, Orlando Perez, and Vincent Finizia. Each letter is 22 pages long, and outlines all the points in Greens' lawsuit against the town alleging breach of contract. It was sent by the third-party administrator Summit Risk Services of behalf of the town's insurer, Selective Insurance Company of New York.

"Selective disclaims any duty to defend or indemnify the Town or its Officials under the Selective Policy for the allegations and claims asserted in the Complaint filed by the Greens at Chester as the Complaint does not allege 'public officials wrongful acts' that occurred during the 'policy period,'" the letter states. The claims raised against the town and its officials were first made in 2019, "well after the expiration of the Selective policy," it says.

The letter gives other reasons that would disqualify the town from coverage, even if the claim were made during the policy period, including:

"Dishonest, fraudulent, criminal or malicious acts or omissions by the Town and/or its Officials," and

"Willful violation of any federal, state, or local statute, ordinance, rule or regulation committed by or with knowledge and consent of the Town and/or its Officials."

The letter further states that the Greens' breach of contract claims do not qualify as "public officials wrongful acts" as defined in the Selective policy.

"Additionally," the letter continues, "there is no coverage to the extent that the Town and/or its Officials failed to cooperate with the 2010 settlement between the Town and the predecessor owner of the property. Furthermore, the Officials do not qualify as insureds under the Selective Policy unless they were acting within the scope of their duties for the Town."

The letter says Selective is furthermore not obligated to pay "any punitive damages alleged relating to the claims."

Officials dispute insurer's argument

Neuhaus spokesperson Justin Rodriguez dismissed the letter, along with the Greens' allegations.

"This appears to simply be a disclaimer from the Town of Chester’s 2009-2010 insurance carrier saying they will not cover an action that happened in 2017-2019," Rodriguez wrote in an email. "The Plaintiff has already been told to re-do their Complaint by the Federal Court because it did not comply with the Federal rules. So we will see what their next set of allegations are. The bottom line is the County believes the lawsuit in its first draft has no merit against the County and we will see what the next Complaint looks like when Plaintiff gets around to filing it."

Finizia said he could not comment on a matter currently under litigation.

Valentine said in a statement last week that he believed the town is covered:

"They are basing their decision to deny coverage on a 2010 settlement agreement between Chester and The Greens of Chester (Chester Arlington, the previous owner of the property).

"They are claiming that the current litigation is part of the previous lawsuit. They were not our insurance carrier at the time in 2010.

"The court has decided that the 2010 lawsuit was closed and could not be reopened. The current lawsuit with The Greens is a new action. Our insurance company's argument denying coverage is not valid based on the 2010 settlement.

"The town has put our carrier on notice with our attorneys to provide coverage under the current policy. This is the pattern and practice of developers like the Greens of Chester to create alleged discrimination, civil rights violations, fair housing violations in an attempt to circumvent our zoning laws and building codes through litigation and settlement agreements to gain more than they are entitled to."