Commercial Division Blog
Additional Insured Satisfied Liability Policy's Notice Requirement
On March 24, 2016, the Court of Appeals issued a decision in Spoleta Construction, LLC v. Aspen Insurance UK Ltd., Case No. 24, rejecting an insurance carrier's denial of coverage to an additional insured based on lack of timely notice of the claim.
In Spoleta Construction, a contractor, Spoleta, entered into a subcontract with Hub-Langie Paving, pursuant to which Hub-Langie was required to (1) indemnify and defend Spoleta for any claims of bodily injury arising from Hub-Langie’s work; and (2) name Spoleta as an additional insured on Hub-Langie's commercial general liability policy. A Hub-Langie employee was injured, and shortly thereafter, Spoleta's insurer sent a letter to Hub-Langie, requesting contact information for Hub-Langie's insurer; advising Hub-Langie of its duty to indemnify and defend Spoleta; and requesting that Hub-Langie put its insurance carrier on notice of the claim. In response, "Hub-Langie's broker forwarded the letter to Aspen -- as its insurer -- along with a general liability notice of occurrence/claim form describing the employee's injury." When the injured worker commenced an action against Spoleta, Aspen disclaimed coverage on the ground of late notice. It argued that the letter from Spoleta's carrier only invoked Spoleta's contractual indemnification rights against Hub-Langie, and did not constitute a notice of claim under the policy. The Court of Appeals rejected this argument, explaining:
We reject Aspen's argument that the documentary evidence established as a matter of law that Spoleta did not timely see to it that Aspen was notified of an occurrence. Aspen claims that it interpreted Spoleta's initial letter as seeking only a defense and indemnity from Hub-Langie pursuant to the indemnification provision of the subcontract because Spoleta did not expressly state that it was seeking coverage as an additional insured. However, the letter itself did not identify the indemnification provision of the subcontract as the basis for the communication -- it simply requested a defense and indemnity under the contract without specifically invoking either the indemnification or additional insurance provisions. Moreover, the letter requested that Hub-Langie "place [its] insurance carrier on notice of this claim" (emphasis added) and provided information about the identity of the injured employee, as well as the date, location and general nature of the accident. That is, in addition to requesting that the insurer be put on notice, the letter provided the details that the policy required to be included by an insured in notice of an occurrence.
Although compliance with notice requirements remains an important issue in insurance law, the New York legislature has mitigated the consequences of late notice considerably for policies issued after January 17, 2009, by requiring liability carriers to show prejudice before disclaiming coverage. See Insurance Law § 3420(a).