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Additional Insured Insurance Coverage

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Additional Insured Insurance Coverage

This course will examine additional insured coverage under liability policies. The course examines when to tender, how to tender, and what to rely upon when tendering to an insurance carrier. This course also examines common language found in general liability policies and frequently used additional insured endorsements. The course also examined what happens when there are multiple policies that insure the same entity.

Transcript

Good afternoon. It's nice and rainy here in New York. I'm Sara Ziolkowski. I am a co-chair of Milber Makris Plousadis & Seiden's Appellate team. I am also co-chair on the coverage team. And I was with you last week. And this week I am all alone presenting for a full hour. So you're going to have to allow me to take a water break here and there. But today's discussion is about additional insurer coverage. And when you receive a tender, what to do when when you have a file determining whether or not to tender and kind of examining specific additional endorsements and New York and Florida law pertaining to the same. So to begin with, I know last week Russ and I spoke a little bit about tendering under the contractual indemnity provisions of contracts or lease agreements. But insurance coverage and contractual indemnity provisions are distinct and legally separate provisions that need to be examined individually. Contractual indemnification provisions generally must await a finding of liability in the litigation for them to be triggered. We discuss the arising out of the cost, in whole or in part, by the acts or omissions provisions that are found in indemnification provisions, but separate and apart from that, if you were to review a contract, there might also be an insurance procurement provision, and that might obligate the the party to provide insurance coverage not just for themselves, but you're looking to make sure that that provision requires that they provide coverage for additional insurance. Also, whether it be the owners, whether it be the contractors, if it's a tenant, they might be obligated to provide coverage for the landlord and further downstream as well. So in New York, the Court of Appeals has held that an agreement to procure insurance is not an agreement to indemnify and hold harmless, and the distinction between the two is well recognized. Whereas the essence of an indemnification agreement is to provide the promise of liability. An agreement to procure insurance specifically anticipates the Promisee's continued responsibility for its own negligence, for which the Promisor is obligated to to furnish insurance, and a lot of times people confuse the two. I, as a coverage attorney, will frequently see people signing to the notification provision and asking carrier to provide additional coverage based on the indemnification provision. What you are really looking for in the contract is a separate standalone requirement that there be insurance placed by the by by the entity and to determine what type of coverage is requested, what the policy limits are, and whether or not that's provision requires that they provide additional insurer coverage to other entities. So as we'll be discussing pretty extensively in this presentation, the additional insurer coverage should be tendered upon receipt of a loss or notice of a lawsuit. Because the earlier you get the tender out, the faster you should get a response and the sooner hopefully another carrier can pick up and provide a defense to your named insurer. Okay. So what is an additional insured in New York? The Court of Appeals defines an additional insured as an entity enjoying the same protections as the named insured. So they're entitled to the same coverage limits. They're entitled to the same defense. They're they're subject to the same exclusions generally as the named insured. And it is important to note at this point that each insurance policy is going to be different. It's very important, and I will discuss this in detail later to review each insurance policies. Provisions for definitions. Some insurance policies will have definitions for the term you that only provides that it's for the named insured. So if they're talking about your work quote your work, they would be talking about the named insurance work and not the additional insured. So it's generally a good practice to have a complete copy of an insurance policy if you're attending coverage for additional insured coverage under that policy. Um, so an additional insured has the benefit of enjoying the protections under policy while having no financial responsibility to pay for the premiums. So I've already alluded upon. Good examples of this are a property owner who is going to be named an additional insured under general contractor's policy. Likewise, a general contractor would likely be asked to be named as an additional insured under a subcontractors policy. Um, or a landlord would be named as an additional insured under a tenant's policy. Okay. Determining whether to tender. So if you have an upstream party and we spoke about this last week, it's usually an owner or a general contractor. Somebody that's upstream. And you want to transfer the risk to somebody downstream. A lower level contractor or subcontractor? Sub subcontractor. There are certain documents that should be reviewed. And I can't stress this enough, because a lot of times as a coverage attorney, I get an assignment and I don't have complete copies of the documents and did allude to this last week. So I'm going to speak about it a little bit more here. The documents that that should be reviewed when determining to tender are contracts. Make sure you have complete copies of the contracts. A lot of times I get lease agreements. Landlord wants to tender to the to the tenant and we have the tenant and I will be reviewing. Lease agreements that date back to 1960s. But there's been changes of ownership. There has been assumptions and assignments of rights. You need to make sure that you have all those relevant lease agreements so that a lease injury that occurred in 2021, you can tie back to a provision that dates all the way back to 1967, for instance. So you want to make sure that if another entity became the landlord from the landlord that entered into the lease, that there is some sort of assignment and assumption of the lease, so that there's a continuing requirement that there be additional insurer coverage. You might want you want to look at purchase orders. You purchase orders very often on the back. They'll have a template boilerplate that says that the subcontractor must be added, or must add the owner and the general contractor as additional insurance. And it will usually provide the the coverage limits. If it's if there's contracts. Contracts frequently have writers you want to review the writers I know we discussed this last week. Also if the contract writer have conflicting language, you need to determine which one prevails. You need to determine whether or not there's any contradictions between them. If not, then then go ahead and move forward with the analysis. Lease agreements. As I just spoke about, you want to make sure that you have all of them and complete copies. Certificates of insurance are helpful. I'm going to go on to that at the next slide. But there really only should be used for a matter of informational purposes only. They generally are allow you to know which carrier is providing coverage to the entity for which you are tendering. So if you have a general contractor and you have a certificate of insurance from a subcontractor, it's helpful. Those certificates of insurance are helpful for the purposes of determining who the carrier is, who the general liability carrier is, who the umbrella carrier is for the subcontractor. So should you decide to tender, you should have that information. And then finally, insurance policies. I generally would request a complete copy of the insurance policy for the entity from which you're seeking coverage so that you know whether or not the their insurer complied with the requirement in the contract, that there be an additional insurer provision, that that additional insurer provision protects your insured. So generally, I request I would look for a complete copies of insurance policies. Okay. So this is a template of a certificate of insurance. I'm sure you guys have seen it all before. Um, certificates of insurance are usually issued by an insurance broker. You know, somebody might be on a job site that might call up their broker and be like, hey, I messed up. I need to have the general contractor added as an additional insured. Could you please provide me a certificate of insurance? The broker issues it. It lists it on the on the schedule that the general contractor is an additional insured. But then you look at the policy and there's no such form. So that's why clearly on the top and I have it highlighted the certificate of insurance states. Clearly this certificate is issued as a matter of informational purposes only and confers no right upon the certificate holder. And again, the certificate holder generally is the party seeking additional insurance coverage. This certificate does not affirmatively or negatively amend, extend, or alter the coverage afforded by the policies below. And then it says underneath important. If the certificate holder is an additional insurer, the policies must be endorsed. So again it's generally not going to be binding. I say generally only because there have been instances in which an entity that's issued a certificate of insurance is actually the agent of the insurance carrier. If they are an agent and they have binding authority. And the issuance of the certificate of insurance is enough to create a question as to whether or not they are entitled to additional insurer coverage. Courts have leaned in holding that this can create additional insurer coverage for the entity, even if there is no endorsement to the actual policy itself. And again the over here in in this section, which I had to redact because it was an actual an actual certificate of insurance that I dealt with on a case. You're going to see the carriers listed. So you would have carrier A, there would be box below here which indicates which carrier that what kind of insurance coverage it is, whether it's general liability, whether it's worker's compensation, automobile coverage or umbrella. So this is what's going to be helpful when you're tendering. You're going to see the name of the insurance carrier. And then generally you'll see right here um what their the policy number. So while it might be helpful, certificates of insurance do not create coverage generally. Um. As I alluded to earlier, I also like to review if possible, copies of insurance policies, and this should be a little bit easier now, especially in New York, with the change of the law that requires disclosure of insurance policies pretty early on in the litigation. So you should have a complete copy of the insurance policy in your file if you're tendering, if you're upstream and what you want to review is you want to review the entire policy, make sure it's a complete copy. The way you can do that is there's usually a schedule of forms, and this is just a cut from one of my actual cases. And the schedule of forms will list all of the forms that put together. Create the insurance policy. So if you're looking specifically for additional insurance coverage, I've highlighted here specific endorsements you might be looking for in a policy. So a CG 2010 or a CG 2037 are both pretty common. Additional insured endorsements that you might find in the policy. And if they're not, actually if you only have a schedule of forms. And since you and if you deal in insurance on an everyday basis, you're probably quite familiar with whether or not they're going to be what the language of these endorsements are. Okay. So most additional insured endorsements will require that there be a written contract or a written agreement in place under which the named insured agreed to provide additional coverage for the prospective additional insured. Um, now I'm going to note not all additional insured endorsements require that the contract be executed before the accident. And in fact, I think the CG 2033 does not require it. Some endorsements do require it, and they'll specifically say that they will provide additional insured coverage, provided that the contract was executed before the bodily injury in question. In other instances, courts have held that simply having a written agreement in place, whether or not it was executed before the accident, whether it was never executed, would suffice to trigger this additional insured coverage. Um. So, for instance, an eye endorsement which provides, quote, any person or organization with whom you have agreed in a valid written contract or written agreement that such person or organization be added as an additional insured on your policy during the policy period shown in the declarations. A court held that this does not require the contract to be executed, and that that case would have been Zurich American Insurance Company versus endurance American Specialty 43 NYS 3d 40, wherein the First Department held that an unsigned purchase order constituted a written contract for purposes of this additional insured endorsement. So if your named, insured and entered into a purchase agreement and agreed to provide additional insurance coverage, that could suffice to trigger coverage under a blanket endorsement. Um, a contract requiring only that the named insured purchase insurance to protect itself, and does not specifically state that they were required to provide additional insurance coverage will not be read by a court to require additional insurance coverage. So if we're talking about a lease agreement and there's a provision in, I think, a few standard form lease agreements that require the tenant to maintain property insurance and to maintain liability insurance, and that's it. That's all that the insurance provision provides. And nowhere in it does it speak about the obligation to provide additional insured coverage. Then courts will find that that alone is not sufficient to trigger a duty to provide coverage to an additional insured. And that's again here. I have here a provision in the contract should not be interpreted as requiring the procurement of additional insured coverage, unless such requirement is expressly stated. And again, the burden in New York for establishing additional insurer coverage falls upon the party seeking the coverage. Whereas if the carrier has denied coverage based on an exclusion, the burden switches over to the carrier to establish that an exclusion applies. So here I have an example of the trash obligation. This is a construction contract where the construction manager, owner, their agents, officers, directors and employees are to be named as an additional insured on a primary non-contributory basis to the subcontractors comprehensive general liability using appropriate ISO forms. So that's exactly a provision which is obligating the subcontractor not just to name the construction manager, but the owner as an additional insured. And we're going to touch base on that on a later slide, whether or not all those entities would be entitled to coverage. But here it's obligating them to provide coverage to these entities on a primary non-contributory basis. And we'll talk about the primary non-contributory basis as well later on. Okay. So some common additional Jordan endorsements that you might come across. Generally the additional joint endorsements are issued by the ISO. And but insurers can and frequently do create their own additional insured endorsements. And we sometimes refer to them as manuscript endorsements. There's a difference between a Blake and additional insured endorsements and a scheduled insured endorsement, which we're going to get into. But some popular forms you might come across or CG 2010, CG 2011, CG 2033 and BP 0402. And generally speaking, these are ISO forms. And afterwards here you would usually see a four digit four letters, excuse me, four numbers, which would identify what version of the endorsement we're dealing with. So as the laws changed, the ISO updates the forms. And that's something we're going to be discussing later as well, because older forms frequently had an arising out of trigger for coverage, and the newer forms have a closed in whole or in part by trigger. Okay. So blanket additional insured endorsements A blanket additional insured endorsement is where the entity to be provided additional insurance coverage is not specifically identified. The endorsement itself is generally going to refer back to the written agreement or the contract. So I quoted earlier from from an additional insured endorsement, CG 2033, which required that there be a written contract in place. Again, that one didn't require that it be signed, just that it be in writing. Some endorsements will include language requiring there be contractual privity between the parties seeking coverage and the named insured. Now privity means that they both be signatories on the on the contract. It has to be a contract between the named insured entity A and the party seeking additional insured coverage entity B, both of them likely will if they didn't sign the contract, at least the contract would specifically identify that this contract is being entered into between entity A and entity B. In the prior slide, I'm going to go back here for a second. This slide required that not only the construction manager but also the owner. So it's in this case, it was likely that the subcontractor entered into an agreement with the construction manager, and they undertook to also provide coverage to the owner. Now some courts. Have held that depending on the language and the additional endorsement, there needs to be privity. So it would have that with respect to that clause that would only trigger additional coverage for the construction manager and under the subcontractors policy, since it was likely that the subcontractor only entered into that that contract with the construction manager. So some examples of cases of additional insured language that has required privity of contract is in all state interior demolition versus Scottsdale. Any person or organization for whom you are performing operations. When you and such person or organization have agreed in a written contract or agreement that all such persons or organizations be added as an additional insured. Similarly, in Turner Construction versus endurance, that endorsement provided any person or organization with whom you added with you have added as an additional insured by written contract. I apologize my slides on the other screen. So so those two I endorsement the language in those two additional insured endorsements require that privity of contract, and the courts have held that it won't extend on to owner entities probably upstream. These generally in these situations is most likely a subcontractors carrier, challenging whether or not it had to provide coverage to an owner when the subcontractor did not, in fact, contract with the owner. There has been some specifically in New York. On the second apartment side, there was one recent case where they did hold that that privity was no longer required. So I'm keeping an eye on that case. But with respect to contracts, whether it be like a sub contract that they want to incorporate the terms of the prime contract, there is significant case law out there, especially in the first apartment in New York, that you cannot incorporate the terms of an insurance procurement provision into a subcontract. So you can't rely on the contractual provisions in a prime contract for a subcontractor that did not contract with the owner and the prime contractor. Okay, so here's an example of the 2033 that I've spoken about. It's labeled additional insured owners lessees or contractors. Automatic status one required in the construction agreement with you. And this beginning paragraph here is where it modifies who is an insured. And this one presently requires privity of contract between the parties that entered into the agreement. Hess scheduled additional insureds frequently found in the CG 2010. I'm sure there are some other ISO forms also, but this is one that that's pretty frequent. Entities are added to the endorsement specifically by name and by schedule, so only entities listed in the schedule and or the declarations are entitled to additional insurance coverage. So it generally doesn't refer back to another contract. It generally specifically identifies the entity that that's entitled to the additional insured coverage. So again I was talking earlier about how there are different versions. So this is zero 413. So April of 2013 and 0704 versions of the CG 2010 had a have a liability caused in whole or in part by trigger, where earlier versions are going to have an arising out of trigger. And this is an example of a schedule. Additional endorsements. You'll usually have the name of the additional insured here. Sometimes I come across it that they want to make the scheduled additional insured endorsements pretty much a blanket additional insured endorsement. And it says right here would say where required by contract. That's pretty broad. So it says where required by contract. That likely would not require privity of contract. That likely would entitle any of the parties listed in the insurance procurement provision to be entitled to additional coverage. And sometimes you limit it to locations, and other times it's with respect to any work performed for the entity identified on the left box. Okay liability costs, in whole or in part by the name of choice, acts or omissions is a very common trigger for additional coverage. Presently, it's a narrower application than the arising out of language, and it's used in the CG 2010 and 2033 presently in circulation. With respect to the indemnification of an additional insured, the coverage is limited to situations where the name Detroit is the proximate cause of the injury. And that's the case in Burlington Insurance versus New York City Transit Authority, which gets thrown around a lot. Burlington since since 2017. But Burlington itself did not actually examine the duty to defend. In fact, nowhere in that case will you see the the words duty to defend or defense in it, because in that case, Burlington had already provided additional defense to the additional insurers. And the issue that was really being examined was indemnification. So you're going to look to the allegations in the complaint to determine whether or not the named insurer could reasonably be a proximate cause of the accident. It didn't change the duty, the standard on the duty to defend. As I cited here, there was a more recent case, Citizens Insurance of America versus American Insurance Company, where the court held that since the underlying injury complaints contains allegations that all defendants are liable for bodily injury and that all defendants were a proximate cause of those injuries, the insurance duty to defend was triggered. So they're pretty much saying that as long as the the underlying complaint alleges that there was bodily injury that was caused by the named insured or the named insured, then the duty to defend has been triggered. The arising out of trigger language you're not going to come across. It's not as frequent now as it had been, but it's generally found in older, additional insured endorsements. And they're still kicking around in some cases, and it's much broader in New York. The Court of Appeals in Rico Construction Corp. versus National Union held that it arising out of is interpreted to mean originating from incident to or having any connection with, and it only requires to be a causal relationship between the injury and the risk for which the coverage is provided. In Rico construction. The fact pattern, I believe, was that there was an employee on the construction site and he was walking and he he fell upon a newly, I think, varnished floor. And the the court held that since he was pretty much in he was he was on the construction site because he was actually employed by Regal's named insured that the duty to defend had been triggered, even though there was no that the accident didn't arise, wasn't excuse me, wasn't caused by his named his employer or the named Insured's work on the property. It was the condition had been created by a subcontractor. So since he was on the property because of his course of scope of the employment for the named insured, there was some causal connection between his injury and the coverage. Um, with respect to instances when a carrier ensures a tenant, there might be an additional insured endorsement that includes an arising out of the ownership, maintenance, or use. This, again, is a very broad endorsement. The courts in New York have held that an additional insured is. Coverage is triggered for accidents that occur on the sidewalk, even if the sidewalk is not part of the leased premises, because the sidewalk must be used to access the leased premises. So if you have a situation when you have a tenant that leases a store on the ground floor of a building, and the accident occurs on the sidewalk outside of the store, even if the lease agreement does not provide that for the for the tenant to maintain the sidewalk. The courts have been very harsh with respect to tenants, and they have found that this creates a duty to defend because the the person would not have been walking on the sidewalk, but for their knee to access the building. So now that we've examined additional insured endorsements and the language and the additional insured endorsements, what what really what are we looking at? I think there was a question last week about it, about whether a carrier can look outside the four corners. So in New York. And insurer's duty to defend is broader than the duty to indemnify. And this is why coverage should be tendered early on in the litigation. You don't need an adjudication of liability. For the most part, a duty arises whenever the allegations of the complaint against the insured, when liberally construed, potentially fall within the scope of the risks undertaken by the insurer. So most of the times people will refer to New York as a four corner state. They'll say, you look at the four corners of the insurance policy against the four corners of the of the complaint, and that's the end all be all. That's a little bit of a misunderstanding. I'm going to get to that in the next slide. Florida law also examines the allegations of the complaints against the insurer to determine whether or not there's a fairly and potentially within the allegations fall within the scope of coverage. So they too, are a Four Corners states. Thank. Okay. So we talked about the Four corners in New York. And this is this is the language I'm going to want to drive home. So whenever there are allegations of the claim liberally to suggest a reasonable possibility or the insurer has actual knowledge of facts establishing a reasonable possibility of coverage. So, for instance, a lot of times and I just had a case actually where we where. The employer of the injured party is not named in the suit in the underlying complaint, because they can't in New York, they can't. They're precluded by the workers comp law. So they're named in the third party complaint. That's a pleading that you can examine. If there's a bill of particulars that's alleges that that the underlying plaintiff was employed by your named insured. That's another document that can be examined for coverage. So if the carrier has any sort of knowledge of facts which establish a reasonable possibility of coverage. The duty to defend is pretty broad in New York states. And in fact, the courts have said the only way you can be relieved of that duty is if you can establish that there's no possible factual or legal basis for which they might ultimately be obligated to indemnify the additional insured, and the duty might might remain, even though you have facts outside the four corners, even though you think that the allegations in the complaint are fraudulent. The duty to defend would still arise. I had a pretty egregious case myself, where we had a homeowner's policy, and we determined that the underlying the underlying plaintiff was in fact a resident of the property. And to get around that, after we deny coverage in the complaint that came about, they said that he was not a resident. They said that he was he was traveling and that he he he didn't live there. And we, you know, the carrier denied coverage. The carrier tested their coverage position. And the court held that because the complaint alleged that the plaintiff did not reside at the property, even though the carrier had evidence that he did, and even though he provided testimony that they didn't, the duty to defend had arisen. So a lot of times, a clever plaintiff's attorney will create coverage by examining the terms of whatever denial you might have issued at the time you received notice of the loss, and they'll create allegations that would trigger the duty to defend so that there's insurance coverage in place. Um, so in Florida, an endorsement providing additional coverage for only only with respect to liability arising out of your ongoing operations perform for that insured was found by the court to be ambiguous and to provide coverage not only for the additional insured by vicarious liability, but also for the additional direct negligence. That was a very broad additional endorsement that was examined by the court in comparison with the case of Garcia versus Federal Insurance Company, where the court examined an additional insured endorsement that provided coverage for any other person with respect to liability because of acts or omissions of the insured, and the court held that the words, acts, or omissions of the insured limited coverage and was was held was affirmed on appeal. And again, this is the duty of defending New York. Even if there's extrinsic evidence that suggests the possibility that the claim may ultimately prove meritless or outside the policy's coverage, an insurer cannot avoid its commitment to provide a defense. So again, this is this is the New York State Court of Appeals holding. It's pretty broad. It's pretty it's pretty harsh. And we have to live with it. There are a few federal cases in New York where they have held that extrinsic evidence can be used by a carrier to escape coverage in the second circuit. In 620 two Third Avenue Company LLC versus National Fire Insurance Company of Hartford, the Second Circuit suggested that extrinsic evidence may terminate the duty to defend in certain circumstances, including when extrinsic evidence unrelated to the underlying merits unambiguously shows there is no possibility of coverage. I would suggest that would occur if, for instance, the claim falls outside the policy period, so you're not contesting an exclusion. You're contesting whether or not there is. In fact, the policy was in place at the time in question. Okay. So we've talked a lot about the defense in comparison similarly to contractual indemnification. The duty to indemnify an additional insured is based on the actual basis for the insurance liability to a third person. So generally, we don't get to that point when we litigate coverage actions. And generally when you're dealing with attorneys that that know coverage, they'll realize that if they're pursuing coverage at the inception of a case, it's really based just on the allegations of the complaint. So similar to contractual indemnification, there has to be a finding of liability, underlying action generally for the duty to indemnify an additional insured to be triggered. And the same goes in Florida that the duty to indemnify is not ripe unless and until the insured has become liable in the underlying action. Okay, so in in New York, the duty to defend arises whenever there is any sort of allegation that would implicate coverage. Now, when examining for coverage, I would turn to the the coverage form, which is the CG 0001, which outlines when there is a duty to defend. Now that language of the coverage form will generally require a duty to defend arises whenever there is an allegation with respect to an occurrence that occurs during the policy period. Now, the term occurrence is going to be defined by the coverage form to mean an accident. And that's key because sometimes you are going to be tendered with coverage from an additional insured, or even from a named insured who seeks coverage for breach of contract, cause of action. And generally, for the most part, courts will hold that a breach of contract cause of action will not trigger the insuring language of the policy. This is because an accident does not equate to a breach of contract. A breach of contract is an intentional, intentional act and is not going to trigger coverage under the insuring agreement. So if that were to occur, you would look to see if there are any other allegations in the complaint, such as negligence, causes of action or an additional cause of action which might trigger coverage under the insuring agreement. If there is another allegation, another cause of action, a duty to defend arises with respect to that cause of action, and until that cause of action has been dismissed by a court, your duty to defend will continue on. And with that, I'm going to turn to the choice of counsel. A lot of times when when a carrier issues a reservation of rights, saying, hey, we're going to defend you with respect to cause of action. A but not with respect to cause of action. B let's say there was a breach of contract, cause of action, a negligence, cause of action the carrier might deny on the breach of contract, cause of action, but agreed to provide a defense under the negligence cause of action. When this does arise, that's going to be under a reservation of rights. And a lot of times people will say, when you defend under a reservation of rights, the the insured or the additional insured has a right to the choice of counsel. But that is not always going to be the case. Um, an insurer's reservation of rights does not automatically entitle the additional insurer to representation of its choice at the insurer's expense. Instead, the insured's rights to an independent counsel will only be triggered when the reservation of rights creates a potential conflict of interest for the counsel provided by the insurer, and in particular, where the defense attorney's duty to the insured would defeat liability on any grounds. But his duty to the insurer would be to defeat liability only on those grounds for which the insurer might be liable. So if there's a conflict of interest, this usually arises when, for instance, you're trying to establish that one cause of action is not covered. And your your defense counsel's goal will be to try and dismiss that. We try to be to establish that that cause of action is dismissed. And if you dismiss that cause of action, then there would be no coverage. When there's when there's a conflict of that nature or where you're relying on the policy exclusion, then the short or the additional insured for who coverage has been sought may be entitled to their choice of counsel. And generally the counsel will have to report to you, but it will be based on the insured's decision. Okay, so I put here just some best practices. So when you're made aware of an accident or occurrence, whether it's you've received a tender or you've received a court loss notice, I would immediately obtain a complete copies of the contracts, purchase orders, interview your insurer, get all the get all your documents in order to determine whether or not you can tender tender downstream. If you are the downstream party and you need to examine, you need to examine whether or not coverage is owed to the upstream party. Similarly, collect all the documents and make sure they're complete. I lose so much time trying to get complete copies of documents when I'm reviewing files, because the duty to defend if a carrier is obligated to provide a defense, it starts when the tender comes in, when the tender goes out. And so if you wait and on the investigation, the defense fees are accruing during this. So it's always best to to make sure you have all your ducks in line before you render a coverage decision. Determination. Okay. So again, this is why the sooner the better. The tender. Because the clock's ticking. In New York, it used to be pretty easy for a carrier to get out of providing coverage when they say, hey, you know, especially if they're named insured. Hey, you didn't provide us with timely notice. We've been prejudiced. Therefore we're denying coverage. New York legislature the New York legislature changed that from policies 2009 on which are pretty much everything. Now, you can't just rely on late notice as grounds for denying coverage. There is a caveat. There is a presumption of of a presumption of prejudice. If a if a carrier doesn't receive notice within two years, or if there's a default judgment already taken, then the burden is on the insurer to prove that the carrier hasn't been prejudice, which is still a pretty high burden for a carrier to show that they weren't prejudiced by the late notice. Okay, so speaking of insurance law 3420, section D two relates specifically to denials of coverage for personal injury and death. And it states if under a liability policy issued or delivered in the state, an insurer shall disclaim coverage or deny coverage for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within the state. It shall give a written notice as soon as is reasonably possible, of such disclaimer of liability or denial of coverage to the insured and the injured person, or any other claimants. And again here it specifically says it relates only to death or bodily injury. So 3420 will not generally apply to property damage claims. So here I have it. Here this is the case law for you. And it place an obligation on the insurer to timely deny coverage for a bodily injury. And we could talk about what what what matters is timely. I think I have a few slides coming up about that. Generally you like to if you're going to be denying coverage on an exclusion, you want to try and get it out within 30 days. I've had cases where courts have held that less than 30 days is untimely, if it's on the face of the complaint. The exclusion is pretty clear, like in a dog bite case, if you have an exclusion for dogs on a homeowner's policy and it's the plaintiff is clearly injured by a vicious dog. The clock really starts ticking the second you get it to get something out, and you could always you could always change your coverage position. But if a late denial you can't change. So insurance insurance law 3420 D provides that who must be notified on the disclaimer. You have to notify the insured. Okay. So who must be notified? The insured the claimants. And notice of a carrier's position to another carrier. So if you receive a tender from another carrier seeking coverage coverage from you, that's not going to suffice under under insurance law 3420 because that's not their agent. Whereas if an attorney for the for the party seeking coverage under to you, you can respond to the to the attorney. And that would suffice for the notice provisions of 3420. Additionally, additional insurance should similarly be as a best practice on any sort of exclusion. Um, so I just spoke about very quickly a short while ago. The timeliness of the disclaimer is important. Insurance law 3420 requires it be as soon as reasonably possible, and it only applies to exclusionary provisions in the policy. So insurance law 3420 will not apply if the tendering party is not a party not entitled to additional insurance coverage, because you can't create coverage by by failing to timely deny coverage. So in Western Insurance Company versus Benton Hauser, the court, the Court of Appeals held that a disclaimer pursuant to Insurance Law 3420 D is unnecessary when a claim falls outside the scope of the policy's coverage portion. Under those circumstances, the insurance policy does not contemplate coverage in the first instance, and requiring payment of a claim upon failure to timely disclaim would create coverage where it never existed. So if you have, for instance, somebody tendered additional insurer coverage to you, and you're denying coverage purely on the grounds that, hey, you know, there's no no contract under which you're entitled to additional coverage, you don't need to issue a denial on that grounds. You need to issue a denial. If you're relying on an exclusion to an entity or a person that's entitled to coverage under the policy. Um, also just there is case law out there that the timing requirements of 3420 D are inapplicable when one carrier is tending to another carrier to try and get co insurance or to transfer the risk. So there are some case law out there that if the carrier carrier A tender care or B carrier B waits a few months to respond, that that that insurance 3420 D does not apply. Okay, so the timeliness of a disclaimer is measured from the point of time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage, and when the basis for denying coverage was or should have been readily apparent before the onset of the delay, the insurer's explanation is insufficient as a matter of law. So, for instance, I gave you the dog bite case, the dog bite incident. If you know that there's an exclusion in the policy. And this is why it's important for you to have a copy of the policy when you receive a tender, if there's an exclusion. And on the face of the complaint, it clearly falls within an exclusion. Get the get the disclaimer out. You can always supplement it. You could always rescind the disclaimer later. But you want you can't go back in time and change the timing requirements set forth by Insurance law 3422. Sarah, had a quick question. Yeah. If there are new facts that are developed, you know, that that our defense counsel becomes aware of but does not alert the carrier until the 30 day has passed? Um, are we still bound by that 30 day from when our counsel learned of the new information? Or would it be from when counsel alerted us? Um, I'm going to say it's from one one council because you've retained council. And if council delays in providing you with that notice, they then. That's an issue. Issue with council. But there they were retained. They were retained by you and they have to report to you and presumably you or their, your agent, you know, you have that tripart relationship with defense counsel. You have the insured, you have the carrier and then you have the attorney. The attorney has to be reporting to both of you. And if you become aware of something, if counsel becomes aware of something, the argument is going to be made by the insured that they should have been you should have been placed on notice of it. Right. Thank you. It becomes complicated. That's why a lot of times, as defense counsel, I don't always have copies of coverage position letters because it kind of mucks the waters off of that of that relationship. Okay. So just going to touch a little briefly on other insurance provisions. So great. You tendered somebody picked up they they said we'll provide you with additional insured coverage. But the inquiry doesn't end there. There's other insurance provisions in every single policy. So a lot of times the carriers will try to pass the buck to another carrier. So when there are multiple policy of insurance in play, you have to conduct a priority of coverage analysis. And its termination of priority will turn on considerations of the purpose of each policy was intended based on evidence contained within the policy itself. So if you have an umbrella policy against general liability policy, the court's going to hold that the general liability policy goes first because because an umbrella policy is meant to truly provide the highest level of coverage. But if you have to general liability policies, you have to examine that other insurance provision. And that's usually found in the coverage form. Okay. And with respect to examining a priority of coverage, if an additional insured has tendered to you or if their carrier has tendered to you, it's important to engage in that priority of coverage and to examine the not only the KG 0001 coverage form, but also other endorsements to the policy, which might have modified the the coverage afforded by that coverage form. If there is an additional insured endorsement in in your policy and the endorsement includes modification to the other insurance endorsement, you need to go back and look at that contract and see, for instance, if your additional insured endorsement provides that it will be accessed unless specifically provides in the contract that its coverage be primary and non-contributory. You need to go back to that contract and look to determine whether or not your named insurer has agreed to provide primary and contributory coverage for the prospective additional insured. If that language is found in the contract, and your additional insured endorsement provides that, the other insurance provision has been modified due to the inclusion of that language, it is highly likely that your policy would be found by a court to be primary to the additional Insured's own coverage, and to be able to do that, and to be able to conduct the priority of coverage, you need to make sure that you do have a copy of all the primary policies of insurance, as well as a copy of the contract under which additional insured coverage has been sought. Generally, for the most part, since we are examining the duty to defend umbrella policies and access policies which may be issued either to the named insured or the additional insured will not come into play at this stage in the litigation. They will come into play later on. If there is a finding of liability against your named insured or against the additional insured, at which point you would they would come into play. If there is an exhaustion of the primary policy limits. So here are some types of other insurance clauses you might find. You might find an excess one or the other insurance provision provides that it's excess to other policies available to the insured. So language here would be this insurance is excess over any other primary insurance. There's the word primary available to you covering liability for damages arising out of the premises or operations or the products completed operations for which you have been added as an additional insured by attachment of an endorsement. So this is if you're a party tendering and you have this language in here, and you find out that the party that the carrier that you tendered to has an additional insured endorsement, this likely would come into play and would make your your coverage excess. In comparison, there are pro rata provisions, which provides that all insurance carriers are responsible for a stated portion of loss when other insurance is available, and specific language of that is, if other primary insurance is available, we will share with all the other insurance by equal parts. Courts have held that if the two other insurance provisions are identical, they're going to cancel one another out and then they'll act as co primary. So it's important to know that picking up on coverage you know getting getting a tender acceptance is well and good. But you want to determine whether or not they're going to be providing the primary level of coverage. And they're going to be providing the defense without asking for contribution from you. Or vice versa. Okay. And I think I'm coming up to my last slide. So communicating that there is or is not coverage. Once you've completed coverage your coverage review you should you should issue a letter. It should be compliant with 3420. We discussed that in New York. It should go out to the claimant so that they're aware of it. It should go out to whichever party tender to you, and it should be in a timely fashion and advise them in clear terms what you're picking up. Are you picking up on a defense? Are you picking up defense and indemnity? And if that's the case, are you not reserving your rights? Are you reserving your rights for the most part. And I don't want to do in broad sweeps. But for the most part, when there is a reservation of rights that's issued by a carrier and they're only going to provide a defense and reserving an indemnity in New York, the insured is allowed to their choice of counsel because there's a presumption that there's a conflict of interest between the carrier and the insured, with the carrier trying to show that there's no coverage and the insurer trying to prove that there is coverage. So in broad I don't want to say this in broad sweeps, but generally, for the most part, if it's under an RR, the the right to a defense that the party gets to choose their own counsel. Um, and I think that might be it. Yeah. So this is my contact information as [email protected]. I think some of you guys have it. My phone number is (516) 870-1128. If you wanted to call me I'd be happy to field any coverage questions. Any questions about the presentation. I know I spoke really quickly. I wanted to get a lot of information out there. I didn't even take a sip of water. I'm very impressed. So if anybody wants to ask me questions, um, please feel free to. Sarah, when you're giving notice, is the best practice to send by certified mail. Return receipt. Absolutely, yeah. And we touched on that a little bit last week. But yes. Certified. Everything's done by by email now. But it's great if you have an email address for the person you can click, you know, request the return receipt on the email. But nothing beats certified mail return receipt because that's evidence. Exhibit A to your motion. Hey, we provided the insured with notice that we're denying coverage and that it was timely. And again, best practice would be to send it to the insurer, the insured, and then is there anyone else that needs to be CC'd or that should be keyed on those tender letters? Well, I know a lot of carriers like to see the the broker of record. Sometimes they'll they'll cc the other parties, even if they don't have necessarily an interest in it. If it's all of the entities listed in the caption, sometimes, like I have a case, I keep getting mail almost every week with the carrier denied coverage even though we have no position on, you know, we have never requested coverage from them. So it's it's better to send it to many people than not enough and get and get screwed by 3420. So. And if they pick up the defense, right, we're going to seek to get our defense costs recouped. But there's certain costs that can't be recouped. Right. Um, well, the course of. So the duty to defend doesn't arise until there's a suit generally. So you would have to look at every, every policy, which is different. But the duty to defend arises when there's a suit. So if there was an investigation that's generally not recoverable. Um, and. How about when you're chasing the tender can that can you get defense costs back for that time? Well, if you're doing a cover, if you're doing a declaratory judgment action, you can get the coverage back for a declaratory judgment action. But there is case law that if you commence a third party action, they're entitled to reimbursement for the third party action. And what if you don't have all the supporting documents that you need up front, which as you said earlier, oftentimes we don't. You got to chase your client. You got to chase the insured for the entire contract. The sub contracts, the quiz. Is it better to just get the tender out and then supplement later on? Oh, absolutely. I mean, again, in New York specifically, the duty to defend goes back to the data tender. So if you don't have all those documents in place, just get something out. I think the best. I'm just saying the best practice is if you have an insurer that's cooperating or if you have if you've had prior cases with this insured and you have the documents in your file or if it's available on the court's websites, you know, pull those documents down, look at them, and then, you know, get it out. But yes, the sooner the better, because that's when the the reimbursement of past defense fees. Because if you do commence a coverage action and you do seek additional insurance coverage, and you do get the declaration that you are an additional insured, they're going to get reimbursement of defense fees dating back to tender. Not only that, in New York they'll get a 9% interest. So. And another thing I see a lot too, that you've also touched on is the competing provisions. You have the underlying contract and then you have a rider, and one clause is more narrow or one is more broad, but there's no language that suggests which one might be more controlling and then becomes a question of construction. It becomes a question of construction. And that's when you have to also rely. Sometimes upon deposition testimony, you're going to have to ask the parties what was intended. A lot of times we'll get indemnification provisions, which include a blanket indemnification provision where the two parties have contract with one another a lot and have a lot of projects going. So they have one, one for all the projects, and you have to examine them and confirm that it's in fact, this indemnification provision with the insurance procurement provision was intended for the project, whereupon the accident occurred. Because it might not be present on the face of the document itself.

Presenter(s)

ML
Michael Lynott
Partner
Milber Makris Plousadis & Seiden, LLP
SZ
Sarah Ziolkowski
Partner
Milber Makris Plousadis & Seiden, LLP

Course materials

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