New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following opinion on March 12, 2004 representing the position of the New York State Insurance Department.

Re: Insurance requirements for the holder of a special use permit for antennas on a telecommunications tower

Questions Presented

1. Under the New York Insurance Law, may an insurance company, which does an insurance business in New York State, issue an endorsement upon a liability insurance policy that is issued to a wireless communication company ("Wireless"), as the holder of a special use permit granted by a town ("Town"), for antennas to be placed upon a telecommunications tower sited on private property in the Town, and which policy covers the Town and its principals as additional insureds?

2. Must the Town and its principals have an insurable interest under N.Y. Ins. Law § 3401 (McKinney 2000) in order for such a liability insurance policy covering the Town and its principals as additional insureds to be valid and enforceable?

Conclusions

1. Yes. Under the New York Insurance Law, an insurance company may issue an endorsement to the liability insurance policy issued to Wireless, the holder of the special use permit, to cover the Town and its principals as additional insureds.

2. No. N.Y. Ins. Law § 3401 applies only to property insurance, not liability insurance. It is not necessary for the Town and its principals to have an insurable interest in order for the liability coverage issued to them to be valid and enforceable. The fact that the Town and its principals have a risk exposure that will be covered by the insurance policy is enough to support the validity and enforceability of the liability coverage.

Facts

A wireless communication company ("Wireless"), has applied to the Town Board of a New York State Town ("Town") for a special use permit to authorize it to install and use six wireless communication panel antennas and related equipment ("antennas") on an existing telecommunications tower sited on private property in the Town. The tower is located on land in the Town that is owned privately. The tower is owned by a company {"Lessee") that leases the land upon which the tower is sited from the private owners. Wireless has entered into an agreement with Lessee to sublease space for its antennas on the tower.

The Town is concerned about its potential liability should it grant the special use permit and the antennas thereafter detach from the tower and injure property or persons under the tower. The basis for such liability, should someone wish to challenge the Town’s decision to grant the special use permit, would be an allegation that the Town erred in allowing too many antennas on a particular tower or, that the method by which such antennas were attached to the tower was faulty. Even if a lawsuit based upon such allegations of liability on the part of the Town ultimately were unsuccessful, the Town would incur legal and other costs during its pendency in hiring legal representation and an engineering consultant.

In order to address its concerns, the Town enacted a new section of its Town Zoning Ordinance ("Zoning Ordinance") to require that those who obtain special use permits secure insurance coverage to protect themselves, as well as the Town, and its officers, boards, employees, committee members, attorneys, agents and consultants ("the Town and its principals") as additional insureds, insuring them against their liability as regards the antennas. The Ordinance provides, as follows:

Liability Insurance:

a. A holder of a Tower Special Use Permit for Wireless Telecommunications Facilities shall secure and at all times maintain public liability insurance for personal injuries, death, and property damage, and umbrella insurance coverage, for the duration of the Tower Special Use Permit in the minimum amounts set forth below.

1. Commercial General Liability covering personal injuries, death and property damage: $2,000,000 per occurrence/ $6,000,000 aggregate;

2. Automobile Coverage: $2,000,000 per occurrence $6,000,000 aggregate;

3. Excess Liability: $1,000,000;

4. Workers Compensation and Disability Insurance in accordance with applicable statutory amounts.

b. The Commercial General liability insurance policy and excess liability policy shall specifically include the Town and its officers, boards, employees, committee members, attorneys, agents, and consultants as additional named insureds.

c. The insurance policies shall be issued by an insurance company licensed to do business in the State and with a Best’s rating of at least A.

d. The insurance policies shall contain an endorsement obligating the insurance company to furnish the town with at least thirty (30) days prior written notice in advance of the cancellation of the insurance.

e. Renewal or replacement policies or certificates shall be delivered to the Town at least fifteen (15) days before the expiration of the insurance that such policies are to renew or replace.

f. Before construction of a permitted Wireless Telecommunications Facilities is initiated, but in no case later than fifteen (15) days after the grant of the Tower Special Use Permit, the holder of the Tower Special Use Permit shall deliver to the Town a copy of each of the policies or certificates representing the insurance in the required amounts.

The Town was conditioning its grant of a special use permit to Wireless upon Wireless naming the Town and its officers, boards, employees, committee members, attorneys agents and consultants ("principals") as additional insureds on the general liability and excess liability insurance policies that Wireless must provide, as per the zoning ordinance provision quoted above. The liability insurance coverage for the Town and its principals would apply to their potential liability for injuries or damages which may be found to have resulted from their negligence in granting the special use permit to Wireless in the event that the Town is also found to have had a responsibility to those who suffered injuries or sustained damages.

The Town takes the position that the statutory requirement of an insurable interest contained in N.Y. Ins. Law § 3401 is not applicable to liability insurance. However, it argues that even if the insurable interest requirement is applicable to liability insurance the Town has an insurable interest. Its insurable interest is based upon its special permit authority for the antennas, its involvement in the four year recertification process under which every four years after a special use permit is issued it must be reviewed, the Town’s lawful and substantial interest in the safety of the antennas and, the potential liability of the Town in a lawsuit resulting from injuries or damage caused by the antennas.

Wireless has advised the Town Board that Wireless cannot comply with the additional insured requirement because the tower is located on private land. Wireless acknowledges that other towns and municipalities require that the town or municipality be named as an additional insured on its liability insurance policy when granting similar applications for special use permits. However, its position is that it only provides such insurance where the tower in question is located on public land. Both Wireless and its insurers have taken the position that the Town and its principals cannot be added to Wireless’ policy as additional insureds where the tower is located on private property because the Town and its principals do not have an insurable interest in the tower, as is required under N.Y. Ins. Law § 3401 in order for coverage to be valid and enforceable.

Wireless takes the position it should not be required to name the Town and its principals as additional insureds because, (1) such requirement is beyond the scope of the Town’s zoning power under Town Law and (2), because the Town does not have an insurable interest given that Wireless’ antennas and equipment will be located on private land. The Department will not address the first position in that it is outside our area of expertise. Rather, we will only address the second position. As to Wireless’ position on insurable interest, it cites to case law that addresses the liability of towns and municipalities for zoning decisions, arguing that the Town, under such decisions, has immunity for such decisions. It asserts that the legal attempts to impose liability upon municipalities for torts caused for violations of zoning and building codes have failed where the courts have found a lack of any special relationship between the municipality and the injured party. Wireless concludes that, therefore, the Town does not have an insurable interest in the subject matter of the Wireless policy to support the Town and its principals being added thereto as additional insureds.

The Town, in a letter of December 2, 2003 responded to Wireless’ arguments. The Town cited to Garrett v. Holiday Inns, 58 NY2d 253 (1983), arguing that the case demonstrates that there is no absolute immunity from liability on the part of a town that issues a permit or a certificate of occupancy and that a town remains liable if it has a special relationship to the injured person or person who suffers damages as a result of the granting of the permit. The Town also argues that N.Y. Ins. Law § 3401, which requires that the insured or beneficiary have an insurable interest, applies only to property insurance and not to liability insurance.

Wireless argues in response that the Town acknowledged that is only subject to liability if an official fails to perform his or her duty as required by law and that, as such, the insurance would provide coverage for intentional acts that can not be covered by insurance. It argues that an insurable interest is required for any contract of insurance to be valid and enforceable and went further in taking the position that there must be an insurable interest in the subject matter of Wireless’ policy but that, in this instance, the potential risk of the Town is beyond the scope of Wireless’ liability insurance policy.

Analysis

Insurable Interest –

An insured must have an insurable interest in the property insured in order for the insurance contract to be enforceable under N.Y. Ins. Law § 3401 (McKinney 2000) which provides, as follows:

§ 3401. Insurable interest in property

No contract or policy of insurance on property made or issued in this state, or made or issued upon any property in this state, shall be enforceable except for the benefit of some person having an insurable interest in the property insured. In this article, ‘insurable interest’ shall include any lawful and substantial economic interest in the safety or preservation of property from loss, destruction or pecuniary damage.

Article 34 of the N.Y. Ins. Law applies to "contracts of property and casualty insurance" and, as such, the Article encompasses both property and liability coverages. This, however, does not mean that the legislative intent in drafting § 3401 was to require an insurable interest for insureds and beneficiaries under liability insurance policies as well as insurance on property. We conclude that, based upon the plain language of § 3401, which addresses a "…contract or policy of insurance on property…", and existing case law, that an insurable interest is not required as to liability insurance in New York. See, Cee Jay Realty Corp. v. The Aetna Casualty and Surety Company, 333 N.Y.S.2d 944 (App. Div. 1st 1971) mod. on other grounds 333 N.Y.S.2d 419 and Charnowitz v. GEICO, 575 N.Y.S.2d 875 (App. Div. 1st 1991)

Consistent with this position, is a letter of the Office of General Counsel dated January 19, 1977, wherein we opined that the manager of real property does not have an insurable interest in the premises so as to support a fire and extended coverage policy. However, the opinion stated that the manager of the real property could be insured for liability coverage for his actions in managing the property because the manager did have an interest in his own professional conduct as manager. This interest was considered enough to support an insurance contract covering his professional liability.

Therefore, the fact that the communications tower in question is located on privately owned land, not land owned by the Town, is irrelevant to the question presented here.

Potential liability of the Town based upon its issuance of the special use permit –

In this instance, liability insurance coverage issued to the Town and its principals, as additional insureds under Wireless’ insurance policy would be valid and enforceable because the Town and its principals have a liability risk exposure to which such coverage would apply. The liability risk exposure is in the potential liability of the Town and its principals that arise out of the Town’s determination to grant the special use permit.

The potential liability in this instance derives from its governmental authority over the placement of the antennas in the Town. The Town, as a governmental entity with zoning authority to grant or deny the issuance of a special use permit to add antennas to a communications tower located within the Town, to recertify said permit every four years after issuance, and with an interest in protecting the safety of its citizens. As such, the Town and its principals have an obligation to abide by the law and act responsibly in considering the application for the special use permit. If the Town or its principals act negligently in granting such a permit, they could be sued by persons who may have been injured or suffered damage to their property as a result of the siting of, or manner of attachment of said antennas to the tower. The liability insurance covering the Town and its principals would not cover their intentional acts, which is generally not permitted in New York, but rather would provide coverage for unintentional acts of negligence on the part of the Town or its principals upon their review of the permit application.

Wireless contends that the Town enjoys immunity from civil actions arising from the performance of its civil functions and argues that municipalities in New York State cannot be held liable for zoning decisions. However, the Town contends that it could be held liable should a person suffer injuries or property be damaged which resulted from a failure on the part of the Town in granting the special use permit. Further, the Town points out that even if litigation is brought against it which ultimately fails it will incur defense costs and engineering costs in order to defend itself.

The case law that Wireless cites to makes it clear that towns and other municipalities enjoy an immunity for enacting zoning regulations while they are acting in a legislative capacity, See B&J Investors Corp. v. Town Board of the Town of Clinton, et al., 392 N.Y.S.2d 480, (App. Div. 2d 1977) and for discretionary zoning determinations such as the wrongful issuance of a building permit, See Dinerman v. Poehlman, 656 N.Y.S.2d 41 (App. Div. 2d 1997), and where the court has not determined there to be a special relationship or duty between the town or other municipality and the injured party, See Worth Distributors, Inc. v. Latham, 464 N.Y.S.2d 435 (1983). Although the Town and its principals, pursuant to case law, appear to enjoy a limited immunity from liability for its zoning determinations, towns and other municipalities continue to be held liable in situations where they are found to owe a special duty of care, or responsibility to, those injured or damaged.

Therefore, even though the Town cannot be held liable for its zoning decisions, per se, this does not mean that the Town may not be subject to liability stemming from a decision by it to issue a special use permit authorizing the installation and use of wireless communication panel antennas and related equipment to be attached to towers located on private property in the Town. While it might not be liable for all of its zoning decisions, a court may nevertheless hold the Town and its principals responsible for their acts of negligence in granting such a special use permit where there was a duty of care owed. Therefore, the Town and its principals still have potential liability as well as an exposure to incurring consulting and attorney’s costs should a lawsuit be instituted against it concerning a matter involving a communications tower, even if the lawsuit is not ultimately successful.

The Town also retains liability for its zoning determinations as to its potential obligation for contribution as a joint tortfeasor, in connection with lawsuits involving injuries or other damages resulting from its discretionary determinations. In Garrett v. Holiday Inns, Inc., 460 N.Y.S.2d 774 (1983), Holiday Inns brought suit for damages arising out of a fire in a motel against the town in which the motel was located, alleging that the town’s approval of changes in the building plans an issuance of a certificate of occupancy for the motel, despite knowledge that blatant fire and safety code violations were involved, entitled the defendants to contribution or indemnity. The Court of Appeals held that notwithstanding the absence of an actionable duty owed to the motel guests by the town, the town could be held proportionately liable to the owners, developers and operator based upon the allegations that it breached an independent, special duty owed to the injured parties. This case recognized that the town owed a duty to provide contribution to a joint tortfeasor, even though it did not owe a duty to the injured person. It is possible that the Town could, similarly, be held liable as a joint tortfeasor with Wireless if a court was to find that the Town had an independent, special duty to Wireless.

The Town and its principals could be held liable for damages resulting from an improper grant of a special use permit to attach antennas to the existing tower when they knew, or should have known, that this was not safe. The Town and its principals could also be found to be contributorily liable as a joint tortfeasor for damages resulting from its zoning decision. As such, the Town and its principals have a liability risk exposure under the insurance policy in question and this interest supports the issuance of coverage to them as additional insureds.

The fact that the instant telecommunications tower is located on private land and not on public land owned by the Town does not alter our conclusion herein that potential liability does exist that supports the insurance coverage in question. There is a potential liability of the part of the Town and its principals, no matter where the tower is physically located, should it have engaged in negligent conduct in granting the special use permit. Although the location of the tower on private land may reduce the likelihood that a court would find a special duty or obligation between the town, this fact alone would not be determinative of the issue. The Town has a governmental interest in overseeing, through the special permit process, what may be attached to such towers that are located within its borders and, how they are attached. Wherever the tower is located within the geographical limits of the Town, the Town has the governmental authority exercised through its zoning power, to review, within the constraints of the federal Telecommunications Act of 1996, 47 U.S.C. § 332 (c)(7) (2001), the placement of a telecommunications antenna to be located in the Town, whether on public or private land. The Town has chosen to exercise its power through a special permit application and review process, now being applied to Wireless.

We conclude that under the N.Y. Insurance Law, an insurer who writes the liability insurance policies to Wireless may properly add the Town and its principals as additional insureds in order to cover their potential liability in connection with the issuance of the special use permit to attach antennas to the telecommunications tower and that such insurance coverage is valid and enforceable. Please note that we have only addressed the issues raised in the context of the applicability of the New York Insurance Law. We have not addressed or opined upon federal laws or regulations that may be relevant to the matter that gave rise to this inquiry.

For further information you may contact Associate Attorney Barbara A. Kluger at the New York City Office.