Extrinsic Evidence May be Admitted Prior to Exclusion Being Strictly Construed Against Insurer

On April 13, 2017, the First Department issued a decision in Heartland Brewery, Inc. v. Nova Casualty Co., 2017 NY Slip Op. 02908, holding that extrinsic evidence may be admitted prior to an exclusion being strictly construed against an insurer, explaining:

The question of whether the terms of a contract, such as an insurance policy, are ambiguous is a question of law for the courts to determine. The contract language is to be read in light of common speech and interpreted according to the reasonable expectations and purposes of ordinary business people when making ordinary business contracts.

When it comes to exclusions from coverage, the exclusion must be specific and clear in order to be enforced and ambiguities in exclusions are to be construed most strongly against the insurer. As this Court has recognized, there are circumstances where extrinsic evidence may be admitted prior to an exclusion being strictly construed against an insure, and where ambiguous words are to be construed in the light of extrinsic evidence or the surrounding circumstances, the meaning of such words may become a question of fact for the jury.

Here, the language of FEMA's flood zone regulations raises an issue of fact rendering the insurance policy's exclusion of flood coverage ambiguous.

(Internal quotations and citations omitted).