Although the issue of late notice may have calmed in recent years, cases still bubble up through the judicial system and reach the Court of Appeals.  In Spoleta Const LLC v Aspen Ins UK Ltd, the Fourth Department asked the Court of Appeals to review whether an additional insured provided sufficient notice to trigger coverage.

Spoleta, the general contractor for a construction project, entered into an agreement with subcontractor Hub-Langie Paving. The agreement required Hub to defend and indemnify Spoleta as an additional insured for claims of bodily injury arising out of Hub’s work. Thereafter, an employee of Hub was injured at the worksite in 2008. Spoleta was first placed on notice of the accident in December 2009 when it received a notice of intent to make a claim from the worker’s attorney. On January 27, 2010, Spoleta sent a letter to Hub providing details surrounding the claim, and advising Hub of its contractual duties to defend under the Spoleta-Hub agreement. The January letter also requested that Hub place its insurance carrier on notice of the claim. The January letter and the Spoleta-Hub contract were timely forwarded to Aspen.

After the worker commenced suit against Spoleta in April 2010, Spoleta requested defense and indemnification from Aspen as an additional insured under Hub’s policy. Aspen disclaimed additional insured coverage to Spoleta on the basis of late notice. Aspen argued that Spoleta received notice of the occurrence in 2009, but did not seek coverage as an additional insured until it was served with the complaint. Aspen argued that the January letter only provided notice of a claim for contractual indemnification, and it there was no indication that Spoleta sought additional insured coverage. Spoleta commenced a declaratory judgment action against Aspen, but the complaint was dismissed by the trial court on a pre-answer motion. On appeal, the Forth Department reversed, but granted leave to appeal in light of a dissenting opinion. At issue for the Court of Appeals was whether the January letter constituted proper notice of claim for additional insured coverage.

The Court of Appeals affirmed the Fourth Department, and rejected Aspen’s argument that the January letter only provided notice of a contractual indemnity claim. The Court held that the January letter simply requested defense and indemnity under the Spoleta-Hub contract without having to specifically invoke either the agreement’s additional insured or indemnification provisions. Moreover, the Court held that Aspen was made aware of how, when and where the “occurrence” took place and the nature and location of the alleged injuries.  As a result, the Court found that the January letter satisfied the notice requirements of the Aspen policy, and reinstated the complaint.

This case demonstrates the Court of Appeals’ reluctance to allow an insurer to escape coverage on a technicality. Aspen believed that the sole purpose of the January letter was to place it on notice that Spoleta intended to make a contractual claim against Hub, and it was unaware whether Spoleta even qualified as an additional insured. Aspen even sent a letter to Spoleta acknowledging Spoleta’s contractual indemnification claim against Hub, and argued that it may have conducted its investigation differently if it knew Spoleta sought additional insured coverage. However, a review of the oral arguments shows that several judges on the Court found this argument to be highly tenuous since Aspen was in receipt of the Spoleta-Hub agreement where Spoleta was named as an additional insured. The judges focused on the fact that compliance with notice provisions are necessary because an insurer must have the opportunity to investigate an occurrence or claim to preserve its rights. Specifically, Judge Pigott stated the improbability of an insurer receiving notice of a claim and saying, “oh, well, we’re not going to go and investigate this because they’re saying they’re looking for indemnification as opposed to [additional insured] coverage.”

The decision seems to accept the realities of construction projects; where there may be multiple parties seeking additional insured coverage, but AIs may not know the proper insurer to tender. In a perfect world, an AI would use trigger words such as “pick up the defense and indemnification” or “we are tendering a defense and indemnification to you under the policy.” However, the decision in Spoleta adopts substance over form and makes clear that such words are not always necessary. Notice provisions may be satisfied by an AI as long as the AI states that it seeks defense and indemnification, provides necessary information regarding the “occurrence,” and advises the party to place its insurer or notice.

Thanks to Dan Beatty for his contribution to this post. If you have any questions about this post, please email Brian Gibbons for additional information.