New York’s Appellate Division, Second Department, holds that a disclaimer or denial of coverage sent to an additional insured’s carrier, which was not an agent for receiving such notice, was ineffective to disclaim coverage under N.Y. Ins. Law Section 3420(d).

In Harco Construction, LLC v. First Mercury Insurance Company, Harco had entered into a construction contract with 301-303 West 125th, LLC. Harco then entered into a subcontract with Disano Demolition Company, under which Disano agreed to demolish structures located on 301-303’s premises. Disano also agreed to purchase a CGL policy naming Harco and 301-303 as additional insureds. FMIC issued a policy to Disano with an additional insured endorsement, which included as insureds organizations for which Disano was performing operations when Disano and such organization had agreed in writing that such organization be added as an additional insured. Harco also was a named insured under a CGL policy issued by Mt. Hawley.

In the course of construction, a partially demolished five-story building collapsed, resulting in numerous personal injury claims against Harco and 301-303. Harco’s insurer, Mt. Hawley, sent a letter to FMIC on behalf of Harco and 301-303, providing notice of the incident and demanding that FMIC defend and indemnify Harco and 301-303 for any resulting claims. FMIC responded with a letter to Mt. Hawley, disclaiming any duty to defend or indemnify Harco, because an exclusion for “[a]ll work over 1 story in height” barred coverage for the claims. FMIC, however, did not disclaim coverage as to 301-303, and did not send its disclaimer letter directly to either Harco or 301-303.

In this action, Harco and 301-303 sought a judgment declaring that FMIC was obligated to defend and indemnify them in the underlying actions.

The court found that the exclusion was applicable to the loss; however, the issue was whether FMIC had waived and/or should be estopped from disclaiming coverage for its failure to send a copy of its disclaimer letter directly to Harco and 301-303. As to Harco, the court found that FMIC’s failure to do so violated N.Y. Ins. Law Section 3420(d), which, for claims arising from accidents resulting in bodily injury or death, requires that an insurer timely disclaim coverage or be estopped form doing so. Here, although FMIC issued a disclaimer letter to Mt. Hawley, it never sent the letter to Harco, and, although Mt. Hawley was acting on behalf of Harco when it sent notice of the occurrence to FMIC, “that did not make Mt. Hawley [Harco’s or 301-303’s] agent for all purposes, or for the specific purpose that is relevant here: receipt of a notice of disclaimer (citations omitted).” The court reasoned that Mt. Hawley’s interests were not necessarily the same as Harco’s in the litigation, and, because Harco had its own interests at stake, Harco was entitled to direct notice from FMIC under the statute.

The court found FMIC’s disclaimer as to 301-303 was effective, because FMIC had demonstrated that 301-303 was not an additional insured under the policy, and that “[a] disclaimer [under the statute] is unnecessary when a claim does not fall within the coverage terms of an insurance policy” (citations omitted).