Spotlight

Insurer Delay Waives Policy Exclusion as Coverage Defense

Apr. 30, 2024

Tae Andrews & Jeffrey L. Schulman

New York law requires an insurer denying coverage for an underlying bodily injury claim to provide a “high degree of specificity” as to the grounds for denial as soon as reasonably possible. In Titan Industrial Services Corp. v. Navigators Insurance Co., the First Department recently held that failing to do so may result in a waiver of coverage defenses, including the potential application of exclusions, that might arguably otherwise bar coverage.

The Facts

Titan Industrial involved an underlying construction accident. The resulting litigation involved, among others, the project’s general contractor and a subcontractor that allegedly provided the injury-causing instrumentality.

The general contractor provided notice of the claim as an additional insured on the subcontractor’s general liability policy. The insurer’s representative expressed a “belie[f]” that a Designated Persons or Entities Exclusion would be a ground for denying coverage. More than seven months after receiving notice of the claim, the subcontractor’s insurer denied coverage, citing the exclusion, which purported to provide that the general contractor was not an insured and, thus, was not entitled to any defense or indemnity coverage under that policy.

Key Takeaways

The First Department ultimately reversed the trial court’s granting of summary judgment in favor of the insurer. The court reaffirmed that New York Insurance Law § 3420 requires an insurer to provide written notice of a coverage denial as soon as reasonably possible. The court held that the insurer’s unexplained, seven-month delay in denying coverage resulted in a waiver of its right to rely on the Designated Persons or Entities Exclusion. The court also noted that while the insurer’s earlier email invoked the exclusion, it did not “unequivocally state” that coverage was being denied on that ground. Thus, Insurance Law § 3420’s requirements were not satisfied. As a result, the court held that the insurer owed a defense to the general contractor as an additional insured under the subcontractor’s policy and ordered the insurer to reimburse the general contractor for the defense costs incurred to date.