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Federal court asks NY to decide ‘failure-to-accommodate’ case

appeals court

A federal appeals court is asking New York’s highest state court to consider whether an insurer must defend a psychotherapy center in litigation alleging discrimination because of a failure-to-accommodate.

Neither New York courts nor the state Superintendent of Insurance have provided guidance on this issue, said the 2nd U.S. Circuit Court of Appeals in New York Wednesday in Brooklyn Center for Psychotherapy, Inc. v. Philadelphia Indemnity Insurance Co.

Fanni Goldman, who is deaf, had sued the Brooklyn Center for Psychotherapy in Brooklyn, New York, for discrimination against her in violation of the Americans with Disabilities Act, the Rehabilitation Act and state law after it allegedly refused to schedule an appointment for her 7-year-old son because of her disability, according to the 2nd Circuit.

A Brooklyn Center employee told her on two occasions the center could not provide interpreter services and she should look elsewhere for her son’s psychiatric treatment, according to the 2nd Circuit.  A jury found for Brooklyn Center, concluding Ms. Goldman had failed to prove unlawful discrimination.

Brooklyn Center’s insurer, Bala Cynwyd, Pennsylvania-based Philadelphia Indemnity, refused to pay defense costs on the basis the complaints did not allege occurrences, which are defined as accidents under the policy, because the center’s actions were intentional.

Brooklyn Center sued Philadelphia Indemnity, arguing the insurer was still obligated to defend it because the center was charged with discriminating against Ms. Goldman by failing to accommodate her hearing disability, the ruling said. 

The U.S. District Court in Brooklyn granted the insurer’s motion to dismiss the case.

 This is an issue for the New York Court of Appeals to consider, a unanimous three-judge appeals court panel said.
The state court has not decided whether insurers must defend insured in actions alleging failure-to-accommodate discrimination under the policy language, and New York courts have not ruled often enough on the issue to set sufficient precedents to make a determination, the panel said. In addition, the policy language is ambiguous on the issue, it said.

The panel, citing an earlier ruling, also said the case involves New York public policy, which the New York Court of Appeals is “better situated than we to make.”

Michael Hawrylchak, an associate with O’Connell & Aronowitz P.C. in Albany, New York, who had argued the case on behalf of Brooklyn Center before the appeals court, said in a statement, “We are gratified that the Second Circuit Court of Appeals did not accept on its face the insurer’s position that recharacterizing an alleged failure to accommodate claim as an intentional wrong automatically deprives an insured of the insurance protection it has paid for over several decades. 

“New York law has long held that disparate impact claims fall within the coverage of liability insurance policies and the result should be no different with a failure to accommodate claim.” 

Mr. Hawrylchak added: “We are hopeful that the New York Court of Appeals will rule that businesses that have purchased insurance to protect against these liabilities will receive the protection for which they have been paying.”

Philadelphia Indemnity’s attorney had no comment.