Tender Letter from One Coinsurer to Another Coinsurer on Behalf of Mutual Insureds Held to Trigger the Timely Disclaimer Requirement of New York Insurance Law § 3420(d)

CGL – ADDITIONAL INSURED – LATE NOTICE – UNTIMELY DISCLAIMER – INSURANCE LAW § 3420(D)
JT Magen v. Hartford Fire Ins. Co.
(1st Dept., decided 5/14/2009)

New York Insurance Law § 3420(d) requires timely disclaimers and denials of liability coverage for death or bodily injury arising out of an accident occurring in New York.  In Bovis Lend Lease LMB, Inc. v Royal Surplus Lines Ins. Co. (27 AD3d 84 [2005]), the First Department held, in part, that 3420(d) does not apply to claims for contribution or full coverage by one coinsurer against another.

The issue before the First Department in this case was whether the prompt disclaimer requirement of 3420(d) is triggered when an insurance carrier receives the notice of claim from another insurance carrier on behalf of a mutual insured asking that the insured be provided a defense and indemnity.  The First Department held that a tender letter one insurer sends to another insurer — asking that their mutual insureds be provided with a defense and indemnity as additional insureds under the latter insurer's policy — fulfills that policy's notice-of-claim requirements so as to trigger that insurer's obligation to issue a timely disclaimer pursuant to Insurance Law § 3420(d).

Travelers insured plaintiff, the manager of a construction site.  Hartford insured a subcontractor and named the construction manager and the site's two owners as additional insureds.  An employee of the subcontractor was injured on the job and sued the owners and construction manager.  Travelers notified Hartford of the underlying action and requested that Hartford defend and indemnify the construction manager and site's two owners as additional insureds.  Fifty-one days after Travelers re-sent a copy of the underlying summons and complaint to Hartford, Hartford informed Travelers that it was disclaiming coverage on the ground that the additional insureds had failed to comply with the policy requirement that they provide notice "as soon as practical" of any "occurrence" that might result in damages covered under the policy, even if no demand has been made against them. A copy of the disclaimer letter was also sent to the additional insureds. 

In AFFIRMING New York Supreme's order which granted plaintiff's cross motion for summary judgment declaring that Hartford's policy was primary to any other policy covering plaintiff, thus obligating Hartford to defend and indemnify plaintiff and the nonparty site owners in the underlying personal injury action, the First Department noted:

Finally, defendant Hartford has not made any attempt to justify its 45-to 50-day delay in disclaiming coverage of the underlying accident. Indeed, it has not even suggested that the letter tendering notice of the claim against plaintiff, IDA and the Yeshiva did not provide it with sufficient facts to disclaim coverage on any basis. Rather, misinterpreting the import of Bovis, Hartford argues that Insurance Law § 3420(d) is inapplicable since the tender letter was from an insurer and the statute does not require a prompt response to claims asserted by other insurers. We thus conclude that Hartford's disclaimer letter was untimely as a matter of law (see e.g. West 16th St. Tenants Corp. v Public Serv. Mut. Ins. Co., 290 AD2d 278 [2002], lv denied 98 NY2d 605 [2002] [30 days unreasonable as a matter of law where sole ground on which coverage was disclaimed was insured's delay in notifying insurer of occurrence]), and that as a result, Hartford is precluded under § 3420(d) from disclaiming coverage.

 Rule:   a tender letter from one coinsurer to another coinsurer on behalf of a mutual insured may trigger the prompt disclaimer requirement of Insurance Law § 3420(d).