Un-Invalidating a Liability Disclaimer

CGL – INSURANCE LAW § 3420(D) – STANDING TO CONTEST DISCLAIMER – NOTICE TO INSUREDS' INSURER
Cincinnati Ins. Cos. v. Sirius Am. Ins. Co.
(4th Dept., decided 5/2/2008)

Sirius issed a liability disclaimer to its named insured, but not to the underlying personal injury plaintiff, and additional insureds Falter, Sewer and City. Cinncinati, the insurer for Falter, Sewer and City, and those entities, brought this DJ action to invalidate Sirius' disclaimer for its alleged failure to comply with New York Insurance Law § 3420(d) in two ways: (1) by not having copied the underlying personal injury plaintiff on the disclaimer; and (2) in not having copied Falter, Sewer and City on the disclaimer.

Insurance Law § 3420(d) provides:

(d) If under a liability policy delivered or issued for delivery in this state, an insurer shall disclaim liability or deny coverage for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state, it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant.

In MODIFYING the motion court's order, the 4th Department held: (1) Falter, Sewer and City had "no standing to assert the alleged statutory violation by Sirius with respect to the plaintiff in the underlying action because they did not suffer an injury as a result thereof, and 'they are not within the zone of interest which the statutory requirement of notice to the injured part[y] seeks to protect'"; and (2) although Falter, Sewer and City were entitled to notice of disclaimer pursuant to Insurance Law § 3420 (d) based upon their status as insureds, the disclaimer was not rendered invalid under that statute based on Sirius' failure to send it to them inasmuch as Sirius complied with the statute by sending the notice of disclaimer to plaintiff Cincinnati Insurance Companies, the liability insurance carrier for Falter, Sewer and City.

Some times, it seems, less IS more. But don't tempt fate by repeating what Sirius did or did not do. The sword of Damocles that is Insurance Law § 3420(d) in relation to otherwise legitimate and strong disclaimers hangs by a very thin hair. Nay, best not to test the strand in the first place.