An Insurer Is Not Required to Deny Coverage Where None Exists

CGL – INSURANCE LAW § 3420(D) – TIMELY DISCLAIMER REQUIREMENT
York Restoration Corp. v. Solty's Constr., Inc.
(2nd Dept., decided 12/14/2010)

If a party seeking coverage is neither an insured nor an additional insured under the policy, does New York Insurance Law § 3420(d) apply to require a prompt disclaimer of coverage?  No, reminds the Second Department.

Although Sirius initially disclaimed coverage to York Restoration Corp. based on late notice, in this action Sirius cross-moved for summary judgment on the ground that York was not an additional insured on the date of the accident.  Supreme Court denied Sirius' cross motion and granted summary judgment to York.

In REVERSING the order appealed from, the Appellate Division, Second Department, held:

Sirius correctly contends that York is not entitled to defense and indemnification because it was not a named insured on the date of the accident. The party claiming insurance coverage bears the burden of proving entitlement (see National Abatement Corp. v National Union Fire Ins. Co. of Pittsburgh, Pa., 33 AD3d 570; Tribeca Broadway Assoc. v Mount Vernon Fire Ins. Co., 5 AD3d 198). A party is not entitled to coverage if it is not named as an insured or additional insured on the face of the policy as of the date of the accident for which coverage is sought (see Essex Ins. Co. v Michael Cunningham Carpentry, 74 AD3d 733; Majawalla v Utica First Ins. Co., 71 AD3d 958; National Abatement Corp. v National Union Fire Ins. Co. of Pittsburgh, Pa., 33 AD3d at 571; Tribeca Broadway Assoc. v Mount Vernon Fire Ins. Co., 5 AD3d at 200). 

Here, York was not named as an additional insured under the policy until approximately five weeks after the underlying accident. The accident occurred on October 29, 2004, but the subsequently issued policy change endorsement, naming York as an additional insured, was not effective until December 6, 2004. Therefore, Sirius had no duty to defend and indemnify York (see ADF Constr. Corp. v Home Insulation & Supply, 237 AD2d 915, 916; Tower Ins. Co. of N.Y. v Joselyn Grocery Corp., 2008 NY Slip Op 31745[U]; see also Travelers Ins. Co. v Utica Mut. Ins. Co., 27 AD3d 456).

York's contention that Sirius may not assert that York is not an insured under the policy because Sirius failed to disclaim on that ground is without merit. A disclaimer pursuant to Insurance Law 3420(d) is unnecessary when a claim does not fall within the coverage terms of an insurance policy (see Markevics v Liberty Mut. Ins. Co., 97 NY2d 646, 648; Matter of Worcester Ins. Co. v Bettenhauser, 95 NY2d 185, 188; Siragusa v Granite State Ins. Co., 65 AD3d 1216, 1217). An insurer is not required to deny coverage where none exists (see Hargob Realty Assoc., Inc. v Fireman's Fund Ins. Co., 73 AD3d 856, 858).  Therefore, when a claim is denied because the claimant is not an insured under the policy, there is no statutory obligation to provide prompt notice of the disclaimer (see Hargob Realty Assoc., Inc. v Fireman's Fund Ins. Co., 73 AD3d at 858; Siragusa v Granite State Ins. Co., 65 AD3d at 1217; Matter of Nationwide Ins. Co. v Smaller, 271 AD2d 537, 537-538; Matter of Fireman's Fund Ins. Co. v Freda, 156 AD2d 364, 366). Under the circumstances, the Sirius policy did not provide coverage to York as of the date of the accident. Requiring payment of a claim upon a failure to timely disclaim would create coverage where it never existed (see Matter of Worcester Ins. Co. v Bettenhauser, 95 NY2d at 188).