Zurich American Insurance Company has lost a key procedural fight in an insurance dispute involving property damage at a Manhattan showroom, with New York’s Appellate Division, First Department affirming that Rhode Island law - not New York law - governs the case.
At the heart of the case is a bad faith counterclaim filed by insureds Providence Capital LLC and Sherle Wagner International LLC, who allege Zurich mishandled a claim connected to damage at Sherle Wagner’s New York showroom. The counterclaim was brought under Rhode Island General Laws § 9-1-33, which permits policyholders to seek damages for an insurer’s bad faith refusal to pay a claim.
Zurich tried to have the claim dismissed by asserting, in its seventh affirmative defense, that Rhode Island law didn’t apply. The insurer argued that since the property at issue is in New York, New York law should govern the dispute. But the trial court dismissed that defense, and on appeal, the First Department affirmed the ruling on May 6, 2025.
The appellate court found that Rhode Island had the most significant connection to the dispute. Providence Capital is domiciled there, the insurance policy was issued there, and it covers multiple affiliated properties located in Rhode Island. Although the property damage occurred in New York, the court emphasized that in cases involving liability insurance covering multistate risks, the law of the insured’s domicile typically applies.
Citing its precedent in Zurich Ins. Co. v Shearson Lehman Hutton and Certain Underwriters at Lloyd's, London v Foster Wheeler Corp., the court concluded that Rhode Island had “the most significant relationship to the transaction and the parties.” It also noted that the governmental interests involved supported applying Rhode Island law.
The policy language itself was not at issue in the decision. Instead, the case turned on the legal framework used to determine which state’s law applies to multistate insurance policies. The ruling clears the way for the insureds’ bad faith counterclaim to proceed under Rhode Island law.
Zurich was represented by Mound Cotton Wollan & Greengrass LLP, with Philip C. Silverberg as counsel. Providence Capital LLC and Sherle Wagner International LLC were represented by Kevin Schlosser of Meyer, Suozzi, English & Klein, P.C., and Daniel M. Rabinovitz of Murphy & King, P.C., admitted pro hac vice.
The decision is uncorrected and subject to revision before its publication in the Official Reports, but it offers a clear takeaway: in multistate insurance disputes, the location of the insured - not the property - can ultimately shape the governing law, especially in claims involving alleged bad faith.
