Court Upholds Rhode Island Law in Zurich Insurance Dispute

News Summary

The New York Appellate Division has upheld a lower court ruling applying Rhode Island law to a legal dispute involving Zurich American Insurance Company and property damage claims linked to a Manhattan showroom. This decision allows insured parties, Providence Capital LLC and Sherle Wagner International LLC, to pursue a bad faith counterclaim against Zurich under Rhode Island statutes, highlighting the importance of the policyholder’s domicile in multistate insurance disputes.

New York – The New York Appellate Division, First Department, has upheld a lower court’s ruling that Rhode Island law applies to a legal dispute involving Zurich American Insurance Company and property damage claims related to a Manhattan showroom. The court’s decision, issued on May 6, 2025, allows insured parties Providence Capital LLC and Sherle Wagner International LLC to proceed with their bad faith counterclaim against Zurich under Rhode Island statutes.

The case stems from allegations that Zurich mishandled a claim concerning damage at the Sherle Wagner showroom located in New York City. The insured parties filed a counterclaim asserting that Zurich acted in bad faith by refusing to pay for the damages incurred. This counterclaim was based on Rhode Island General Laws § 9-1-33, which empowers policyholders to pursue damages against insurers for bad faith actions.

Zurich sought to dismiss the counterclaim, arguing that the legal issues should be governed by New York law, given that the property in question is situated in New York. However, the trial court rejected this argument, stating that Rhode Island law was indeed applicable to the case, a decision that has now been affirmed by the appellate court.

The justification for applying Rhode Island law lies in the fact that Providence Capital is based in Rhode Island and that the insurance policy covering not only the Manhattan showroom but also other properties within Rhode Island was issued in that state. The appellate court found that Rhode Island held the most substantial connection to the case, emphasizing the significance of the policyholder’s domicile in determining the applicable law when disputes cross state lines.

The ruling is significant in the landscape of multistate insurance disputes, where the location of the insured party may take precedence over the location of the insured property. In this instance, the court’s decision aligns with precedents indicating that typically, the law of the state where the policyholder is domiciled governs these types of conflicts.

The implications of this ruling extend beyond the current dispute, highlighting the importance for insurers to consider the domicile of their policyholders when drafting and enforcing insurance contracts that involve risks in multiple states.

Zurich was represented in this legal matter by the firm Mound Cotton Wollan & Greengrass LLP, with attorney Philip C. Silverberg as counsel. Providence Capital LLC and Sherle Wagner International LLC were represented by Kevin Schlosser and Daniel M. Rabinovitz.

This outcome effectively clears the path for the counterclaim against Zurich, allowing the insureds to seek resolution under the framework of Rhode Island law. As legal debates surrounding insurance practices continue, this ruling serves as a precedent for similar cases that may arise in the future.

Overall, the appellate court’s decision reinforces the notion that multistate insurance disputes are complex and that states may hold varying degrees of influence over the laws that govern them, illustrating the need for clarity and careful consideration in the insurance industry.

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