Wade Clark Mulcahy LLP

A New York court recently addressed an insurer’s untimely disclaimer letter, which disclaimed coverage based on the policy’s classification endorsement.
In <a href="http://blog.wcmlaw.com/wp-content/uploads/2016/02/Black-Bull-Contracting-LLC-v.-Indian-Harbor-Insurance-Company.pdf" rel="">Black Bull Contracting, LLC v. Indian Harbor Insurance Company</a>, Black Bull was hired to perform demolition work at a construction site.  A Black Bull employee was injured and sued the property owner.  The owner sued Black bull.
Indian Harbor Insurance Company was Black Bull’s insurer.  The policy contained a classification endorsement providing, “this insurance applies only to those operations that are classified or shown on the Declarations”.  The policy’s declarations page listed four classifications: the “Contractors—subcontracted work—in connection with construction, reconstruction, repair or erection of buildings—Not Otherwise Classified.”
Once suit was filed, Black Bull tendered its defense, and that of the owner (as an additional insured) to Indian Harbor.  More than two months after receiving the tender, Indian Harbor disclaimed coverage on the ground that the demolition work did not fall within the classifications covered by the policy.  Black Bull commenced a declaratory judgment action, and Indian Harbor moved to dismiss the complaint.
In analyzing whether to grant Indian Harbor’s motion, the court first determined that the timeliness, or lack thereof, of Indian Harbor’s disclaimer, was not a bar to denying coverage.  The court concluded the policy’s classifications defined the activities that were within the scope of coverage and did not constitute exclusions.  Thus, since the injury causing activity fell outside the scope of the policy’s coverage, the lack of timeliness of Indian Harbor’s disclaimer would not prevent it from denying coverage (as opposed to an untimely disclaimer relying on an exclusion).
Next, the court analyzed whether the demolition fell within the policy’s enumerated classifications.  Black Bull argued that demolition fell under the policy’s “Contractors—subcontracted work—in connection with construction, reconstruction, repair or erection of buildings—Not Otherwise Classified” classification.  The court disagreed.  The court concluded that to utilize Black Bull’s interpretation would render the policy meaningless.  Since the claim fell outside of the scope of coverage, Indian Harbor was not obligated to defend or indemnify the insured (or any additional insured) in connection with the underlying lawsuit.
This case illustrates that an untimely disclaimer may not always act as a bar in denying coverage, so long as the claims fall outside the scope of the policy’s coverage.  In addition, a policy’s classification endorsement should always be reviewed, as this sometimes overlooked endorsement, may ultimately act as a complete bar to coverage.
Thanks to Colleen Hayes for her contribution to this post.