No Way Out – Additional Insured Coverage Owed (NY)

As often happens when more than one insurance policy may provide coverage for a claim, the court is called upon to resolve the dispute between insurers. Recently, in 4815 Dev. Corp. v Harleysville Ins. Co. of N.Y., the Appellate Division, Second Department addressed such a claim between two insurers who provided additional insured coverage for the same leased space to the landlord.

The underlying claim involved a wrongful death claim wherein the descendent fell through a door and down a flight of stairs at premises leased to a laundramat. By way of background, the plaintiff leased space in a building it owned to Today’s Laundromat, Inc. In accordance with the lease, Today’s Laundromat obtained comprehensive general liability insurance from United National Specialty Insurance, naming plaintiff as an additional insured. However, during the course of the original lease with plaintiff, Today’s Laundromat assigned its lease to New Today’s Laundromat, Inc. Harleysville Insurance issued a commercial general liability policy to New Today’s, also naming plaintiff as an additional insured.

The accident for which plaintiff sought coverage occurred during the terms of both the United and Harleysville policies. When the decedent’s estate commenced an action to recover damages for personal injuries, plaintiff requested that United defend and indemnify it. In its notice of claim, plaintiff informed United that the allegedly defective door which caused the decedent’s accident had been installed by United’s named insured, Today’s Laundromat. Approximately 49 days after receiving plaintiff’s notice of claim, United disclaimed coverage to its putative additional insured on a variety of bases.

Plaintiff then commenced a declaratory judgment action. Harleysville agreed to defend and indemnify plaintiff but cross-moved for summary judgment declaring that United was obligated to contribute equally to plaintiff’s defense. Harleysville brought an appeal after the Supreme Court denied it’s cross-motion.

The Appellate Division found Harleysville made a prima facie showing that United was obligated to contribute equally to plaintiff’s defense pursuant to the additional insured endorsement in United’s general liability policy. Specifically, section 1(b) of the endorsement provided that: “If liability or damage is imposed or sought to be imposed on the additional insured because of: . . . Its acts or omissions and those of the named insured, as to the defense of the additional insured, this insurance will act as coinsurance with any other insurance available to the additional insured, in proportion to the limits of liability of all involved policies.”

Harleysville provided evidence documenting that a claim asserted against the plaintiff was based upon the acts or omissions of Today’s Laudramat, triggering United’s duty to contribute to plaintiff’s defense under the additional insured endorsement.

Additionally, the Court found that contrary to United’s argument, there is no “requirement with respect to a liability policy that an insured have an insurable interest in the covered premises.”

The Appellate Court also rejected United’s contention that disclaimer was appropriate because plaintiff failed to give notice of the claim “as soon as reasonably practicable,” as required by the policy. In countering United’s argument, Harleysville demonstrated that United’s 49-day delay in issuing a notice of disclaimer to plaintiff was unreasonable as a matter of law, and, therefore, United was precluded from disclaiming coverage based on the alleged lateness of the notice of claim.

Special thanks to Joseph Fusco for his contribution.

For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com