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In New York, Timely Disclaimer Required When “Ample Grounds to Conclude that Excess Coverage Might Be Triggered”
May 10, 2024
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In New York City Hous. Auth. v. Admiral Ins. Co., No. 2023-00733, 2024 WL 2001429 (N.Y. App. Div. May 7, 2024), the Appellate Division, First Department resolved a dispute between the New York City Housing Authority and Admiral Insurance company, which issued primary and excess insurance policies to the NYCHA.
The factual timeline of the underlying claim is straightforward: the Labor Law personal injury lawsuit was filed against the NYCHA in 2016, at which time Admiral disclaimed coverage under an exclusion in its primary policy. In 2017, NYCHA’s defense attorney provided Admiral with a litigation plan for the NYCHA’s defense; Admiral waited to disclaim coverage under its excess policy until 2018. The NYCHA thereafter sought a determination that Admiral’s excess disclaimer was untimely and, therefore, Admiral should be prohibited from disclaiming coverage under that exclusion.
The insurer claimed that its disclaimer was timely because, as an excess insurer, its duty to disclaim was not triggered until there was a “reasonable possibility” that the primary insurance might be exhausted and the claim would reach the excess layer. The court disagreed.
The First Department held that the excess insurer’s duty to disclaim in a timely manner was triggered by the underlying defense counsel’s litigation plan, in which defense counsel provided “ample grounds to conclude that excess coverage might be triggered.” This difference between “reasonable possibility” and “ample grounds to conclude” is small, but the distinction contains considerable legal significance for an excess insurer.
