Pursuant to New York Insurance Law §3420(d), insurers seeking to disclaim coverage to an insured must act expeditiously or risk being estopped from disclaiming coverage. The application of §3420 to excess insurers continues to evolve, and was addressed in a recent decision by the Appellate Division, First Department, in Yoda, LLC, et al. v. National Union Fire Insurance Company of Pittsburgh, PA.
In 2003, Yoda, a general contractor, tendered its defense and indemnification for an underlying personal injury suit to a subcontractor, and the subcontractor’s primary insurer accepted the tender. National Union, the subcontractor’s excess insurer, monitored and actively participated in the litigation for three years, including attending a mediation and engaging in settlement negotiations, without ever issuing any position letter. In 2006, after plaintiff was granted partial summary judgment in the underlying suit, National Union disclaimed coverage, arguing that the certificates of insurance it was previously provided were improper and that Yoda was not an additional insured, and, in any event, the loss was excluded based on a specific policy exclusion.
However, the Court held that the excess insurer’s inexplicable delay in issuing a disclaimer, based, in part, on its failure to timely obtain a copy of the primary policy, estopped the excess insurer from denying the tender three years later. As such, National Union was required to provide the owner and general contractor with coverage for the underlying action.
Thanks to Chris O’Leary for his contribution to this post. If you would like more information, please contact Mike Bono at firstname.lastname@example.org.