Realm Nat’l Ins. Co. v. Hermitage Ins. Co.

In this declaratory judgment action, the insured’s general liability carrier disclaimed coverage to the insured’s workers’ compensation carrier based upon an exclusion that: specifically excluded both coverage for bodily injury to an employee of the insured arising out of or in the course of employment, and coverage for “any obligation [of the insured] to share damages with or repay someone else who must pay damages because of the [employee’s] injury.” The workers’ compensation carrier was seeking a declaration that the general liability carrier had to contribute toward the defense and indemnification of the insured with respect to the underlying action in which the insured’s employee sought damages for injuries sustained during the course of employment.

The Appellate Division, First Department rejected the workers’ compensation carrier’s argument that the disclaimer was untimely pursuant to Insurance Law section 3420(d). Notably, the Court rejected the plaintiff’s argument that the disclaimer letter did not apprise the claimant with a high degree of specificity of the grounds upon which the disclaimer was predicated. The Court held that the disclaimer was not rendered ineffective by the general liability carrier’s quoting only half of the exclusion language in the disclaimer letter. The Court noted that this was especially so because a potential co-insurer and not the insured was challenging the disclaimer.