This action for a declaratory judgment arises from an underlying action, Restrepo v. City of New York and New York City Housing Authority, Index No. 24726/2016 (Sup. Ct. Bronx Co.), where Restrepo sues for personal injuries sustained while working at a construction project for nonparty subcontractor AAA Windows & Doors Corporation. Plaintiff was the projects general contractor. AAA Windows obtained a commercial general liability (CGL) policy and an excess liability policy from defendant Admiral Insurance Company, both naming plaintiff an additional insured and including an identical New York Action Over Exclusion Endorsement, which excludes coverage for any bodily injuries sustained by an AAA Windows employee. Aff. of Howard S. Edinburgh Ex. F, at 9, Ex. G, at 18.
Plaintiff moves for summary judgment declaring that Admiral Insurance untimely disclaimed coverage under the excess liability policy pursuant to New York Insurance Law § 3420(d)(2). C.P.L.R. §§ 3001, 3212(b). The court grants plaintiffs motion as follows.
II. UNTIMELY DISCLAIMER
When an insurer has sufficient knowledge of facts entitling it to disclaim, or knows that it will disclaim coverage, it must notify the policyholder in writing as soon as is reasonably possible. Country-Wide Ins. Co. v. Preferred Trucking Services Corp., 22 NY3d 571, 575-76 (2014). An insurer must disclaim coverage when the insurer first becomes aware of the ground for its disclaimer. Continental Cas. Co. v Stradford, 11 NY3d 443, 449 (2008).
Insurers bear the burden to justify any delay in disclaiming coverage. Country-Wide Ins. Co. v. Preferred Trucking Services Corp., 22 NY3d at 576; First Fin. Ins. Co. v. Jetco Contr. Corp., 1 NY3d 64, 69 (2003); Hartford Ins. Co. v Nassau County, 46 NY2d 1028, 1029 (1979). If an insurer fails to excuse a late disclaimer, its timeliness poses a legal question for the court, and courts have found relatively short periods to be unreasonable as a matter of law. ADD Plumbing, Inc. v. Burlington Ins. Co., 192 AD3d 496, 497 (1st Dept 2021).
A. Initial Tender Letter
Janine Silver, plaintiffs attorney in the underlying action, forwarded Restrepos Notice of Claim to Admiral Insurance and tendered a claim for coverage under both policies October 22, 2015. Angela Rando, a Litigation Administrator for Admiral Insurance, acknowledged receipt of Silvers correspondence in an email dated October 22, 2015, and requested Admiral Insurances policy numbers for the CGL policy (FEI-ECC-XXXXX-XX) and the excess liability policy (FEI-EXS-XXXXX-XX), both of which Silver provided that same day. About five months later, in correspondence dated March 17, 2016, Admiral Insurances agent, FARA Insurance Services, notified plaintiff that Admiral Insurance had completed its investigation into this matter and disclaimed coverage under the CGL policy pursuant to its New York Action Over Exclusion Endorsement. Edinburgh Aff. Ex. J, at 2. FARA Insurance Services did not address Silvers tender regarding the excess liability policy.
Admiral Insurance maintains that it lacked sufficient information to disclaim coverage under the excess liability policy until Admiral Insurance received Restrepos Bill of Particulars on August 14, 2018, which provided details of his injuries and treatment. FARA Insurance Services investigation, however, belies Admiral Insurances position. The investigation revealed that Restrepo was employed by AAA Windows, which then and there provided Admiral Insurance its basis to disclaim under the CGL policys New York Action Over Exclusion Endorsement. Admiral Insurance inexplicably overlooked the same exclusion in the excess liability policy. Thus Admiral Insurances disclaimer of coverage under the excess liability policy August 28, 2018, over two years after Admiral Insurance was sufficiently aware of the facts that would support a disclaimer, is utterly unreasonable. ADD Plumbing, Inc. v. Burlington Ins. Co., 192 AD3d at 497.
Moreover, even where the basis for disclaimer is not readily apparent, the insurer has a duty to promptly and diligently investigate the claim. GPH Partners, LLC v. American Home Assur. Co., 87 AD3d 843, 844 (1st Dept 2011). If Admiral Insurance genuinely believed that it lacked information to disclaim coverage under the excess liability policy, even though Admiral Insurances own investigation belied such a belief, Admiral Insurance still owed plaintiff a duty to investigate the claim and request additional information to determine whether the New York Action Over Exclusion applied. See Sumner Bldrs. Corp. v. Rutgers Cas. Ins. Co., 101 AD3d 417, 418 (1st Dept 2012); Admiral Ins. Co. v. State Farm Fire & Cas. Co., 86 AD3d 486, 490 (1st Dept 2011). Admiral Insurance was not permitted to wait idly until another source volunteered more information. GPH Partners, LLC v. American Home Assur. Co., 87 AD3d at 844.
Yet no evidence indicates that Admiral Insurance requested any information from plaintiff regarding coverage under the excess liability policy after Admiral Insurance received plaintiffs initial tender. GPH Partners, LLC v. Am. Home Assur. Co., 87 AD3d at 844; Utica Natl. Ins. of Tex. v. Kassie, 202 AD3d 800, 802 (2d Dept 2022); Golden Ins. Co. v. Ingrid House LLC, 2022 WL 2165252, at *3 (2d Cir. June 14, 2022). To the contrary, Admiral Insurances agent completed its investigation and fundamentally neglected to address plaintiffs claim under the excess liability policy when presented grounds to disclaim pursuant to that policys New York Action Over Exclusion Endorsement, the same basis on which Admiral Insurance already had disclaimed under the CGL policys parallel exclusion. Edinburgh Aff. Ex. J, at 2.
Admiral Insurance thus provides no reasonable excuse that justifies the late disclaimer. ADD Plumbing, Inc. v. Burlington Ins. Co., 192 AD3d at 497. Therefore the court grants plaintiffs motion for summary judgment declaring that Admiral failed to timely disclaim coverage under the excess liability policy. C.P.L.R. §§ 3001, 3212(b).
B. Litigation Plan
Admiral Insurance insists that its duty to disclaim was triggered only when Admiral Insurance became aware of facts that raised a reasonable possibility of coverage under the excess liability policy, as opposed to when Admiral Insurance became aware of grounds to disclaim under that policys exclusions. Continental Cas. Co. v. Stradford, 11 NY3d at 449; First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d at 69; Matter of Allcity Ins. Co. (Jimenez), 78 NY2d 1054, 1056 (1991). An excess insurer, however, once it becomes aware of an applicable exclusion, owes the same obligation to disclaim under Insurance Law § 3420(d) as a primary insurer. Highrise Hoisting & Scaffolding, Inc. v. Liberty Ins. Underwriters, Inc., 116 AD3d 647, 648 (1st Dept 2014); Reyes v. Diamond State Ins. Co., 35 AD3d 830, 831 (2d Dept 2006). Although the excess insurer owes no obligation to pay a claim until the primary insurance is exhausted, the prospect of exhaustion does not factor in the obligation to disclaim timely. Nevertheless, were the court to consider this contention, the Litigation Plan, dated April 17, 2017, that Silver forwarded to Admiral Insurance still required it to disclaim well before August 28, 2018.
The excess liability policy covers damages over $1,000,000.00. Admiral Insurance treats the reasonable possibility of coverage as more akin to a probability of coverage and emphasizes the uncertain continuity Restrepos claimed injuries. The Litigation Plan anticipated his potential damages and thus plaintiffs potential liability to include $500,000.00 in future medical expenses and $2,500,000.00 in lifetime lost wages in the event Restrepo was permanently disabled from working, vastly exceeding the primary CGL policy, without even accounting for his pain and suffering. The Litigation Plan recounted his undisputed testimony that he was struck by a falling brick without overhead protection and that he suffered head trauma, lost vision in one eye, and neurological and orthopedic injuries to his head, neck, and spine. Although the Litigation Plan pointed out that the results of a magnetic resonance imaging (MRI) of Restrepos neck and spine still were pending, which raised the possibility of serious bodily injuries, Admiral Insurance never followed up to find out those results, what treatment Restrepo needed and underwent, or whether he returned to work.
These facts collectively raised a reasonable possibility of coverage under the excess liability policy that obligated Admiral Insurance to disclaim or at least investigate and then determine coverage under that policy. Had Admiral Insurance undertaken any investigation of the MRI results or Restrepos treatment, surely Admiral Insurance would have found that Restrepo underwent lumbar spinal surgery in 2016 and did not return to work. Since Admiral Insurance did not disclaim coverage until August 28, 2018, over 16 months after receiving the Litigation Plan, and does not show any investigation over that time, the disclaimer is still untimely.
III. CONCLUSION
For the reasons explained above, the court grants plaintiffs motion for summary judgment against defendant Admiral Insurance Company. C.P.L.R. § 3212(b). The court declares and adjudges that Admiral Insurance Company untimely disclaimed coverage pursuant to the New York Action Over Exclusion Endorsement of excess liability policy FEI-EXS-XXXXX-XX, rendering the disclaimer ineffective. C.P.L.R. § 3001. This decision constitutes the courts order and judgment.
DATED: December 23, 2022
LUCY BILLINGS, J.S.C.
Lucy Billings, J.