Under New York Insurance Law §3420(d)(2), an additional insured becomes bound by a policy exclusion only after the insurer sends timely notice of the exclusion directly to that additional insured. Failure to provide timely notice of policy disclaimers directly to each additional insured will result in that disclaimer being deemed void. This position was recently reinforced by a New York trial court, in a case where an additional insured sought coverage for injuries resulting from lead exposure. Vargas v City of New York, 2016 N.Y. Misc. LEXIS 153 (N.Y. Sup. Ct. Jan. 15, 2016). The insurer, a third party defendant in the case, denied coverage on grounds that the policy contained a lead exclusion of which the primary insured was given timely notice.
The insurer argued that the requirements of §3420(d)(2) were met when it provided timely notice of the exclusion to the primary insured under the policy. The court rejected this argument, holding that for an additional named insured to be bound by a policy exclusion, notice of the exclusion must be sent directly to that additional insured. Constructive notice through the primary insured would not apply.
In the alternative, the insurer argued that timely notice was provided as the insured first made its tender of claim upon filing the complaint and, therefore, notice of the exclusion was timely provided via the insurer’s answer 45 days later. The court rejected this argument as well, citing case law which declares a disclaimer untimely if it occurs more than 30 days after a claim is tendered.
In sum, while the court permitted a 30 day window following tender of claims for insurers to issue disclaimers, including notice of exclusions, best practices recommend that an insurer provide all disclaimers and notices to each named and additional insured listed in the policy. Doing so will help to minimize the harsh effect of failing to timely provide the notice required by §3420(d)(2).