Additional Insureds Did Not Show Unity of Interest With Named Insured Sufficient to Satisfy Their Independent Notice Obligation

CGL – ADDITIONAL INSURED – LATE NOTICE – INSURED DEFENDANTS UNITED IN INTEREST
23-08-18 Jackson Realty Assoc. v. Nationwide Mut. Ins. Co.
(2nd Dept., decided 7/8/2008)

It is nothing new that additional insureds have been held to have an independent duty to provide timely notice of an occurrence to their primary insurers, regardless of whether the named insured has already provided notice of that occurrence. In this case, the court pointed out that there are situations, however, in which timely notice by one insured may be deemed timely notice by another.

Plaintiffs-owners of certain premises in Queens hired non party Integrity Construction and Consulting Services to perform renovation work on the premises. Their agreement obligated Integrity to purchase liability insurance for the project and name the plaintiffs as additional insureds. Integrity obtained such coverage from Nationwide. The policy entitled Nationwide to notice "as soon as practicable" of both (1) an "occurrence" (i.e., an accident) which might result in a "claim," and (2) of a "claim" or "suit" brought against any insured.

During the renovation project, two workers allegedly were injured. Each commenced a personal injury action against both Integrity and the plaintiffs. Plaintiffs made a demand that Nationwide defend and indemnify them in the actions as additional insureds, but Nationwide disclaimed coverage, based on the plaintiffs' late notice of the occurrence. Plaintiffs then commenced this DJ action.

In AFFIRMING the Nassau Supreme's denial of summary judgment to plaintiffs, the Second Department opined:

The plaintiffs, as additional insureds, had an implied duty, independent of Integrity, to provide Nationwide with the notices required under the policy, i.e., notice "as soon as practicable" of both the "occurrence" and of any "claim" or "suit" arising therefrom (see City of New York v St. Paul Fire & Mar. Ins. Co., 21 AD3d 978, 981; Ambrosio v Newburgh Enlarged City School Dist., 5 AD3d 410, 412; Sayed v Macari, 296 AD2d 396, 397; City of New York v Certain Underwriters at Lloyd's of London, 294 AD2d 391, 391; Structure Tone v Burgess Steel Prods. Corp., 249 AD2d 144, 145; see also Ell Dee Clothing Co. v Marsh, 247 NY 392, 396). "The fact that an insurer may have received notice of the claim from the primary insured, or from another source, does not excuse an additional insured's failure to provide notice" (City of New York v St. Paul Fire & Mar. Ins. Co., 21 AD3d 978, 981).

However, there are situations in which timely notice furnished by one insured may be deemed timely notice by another. Where two or more insureds are defendants in the same action, notice of the occurrence or of the lawsuit provided by one insured will be deemed notice on behalf of both insureds only where the two parties are united in interest or where there is no adversity between them (see Ambrosio v Newburgh Enlarged City School Dist., 5 AD3d 410, 412 [occurrence]; Sayed v Macari, 296 AD2d 396, 397 [occurrence]; City of New York v Certain Underwriters at Lloyd's of London, 294 AD2d 391, 391 [lawsuit]; National Union Fire Ins. Co. of Pittsburgh, Pa. v State Ins. Fund, 266 AD2d 518, 519-520 [occurrence]; Structure Tone v Burgess Steel Prods. Corp., 249 AD2d 144, 145 [lawsuit]; Delco Steel Fabricators v American Home Assur. Co., 40 AD2d 647, 648, affd 31 NY2d 1014 [occurrence and lawsuit]).

In this case, the plaintiffs failed to make a prima facie showing that, in Sheehan's personal injury lawsuit, they are united in interest with Integrity (see generally Alvarez v Prospect Hosp., 68 NY2d 320). * * * * * On the current record, there remain questions of fact on this issue; accordingly, the Supreme Court should not have made a determination that the plaintiffs had a duty, as a matter of law, to furnish Nationwide with the required notices.