| Pav-Lak Indus., Inc. v Arch Ins. Co. |
| 2008 NY Slip Op 08528 [56 AD3d 287] |
| November 13, 2008 |
| Appellate Division, First Department |
| Pav-Lak Industries, Inc., et al.,Appellants-Respondents, v Arch Insurance Company, Respondent-Appellant, et al.,Defendants. |
—[*1] D'Amato & Lynch, LLP, New York (Neal M. Glazer of counsel), forrespondent-appellant.
Order and judgment (one paper), Supreme Court, New York County (Edward H. Lehner, J.),entered January 29, 2008, which denied plaintiffs' motion for summary judgment and granteddefendant Arch Insurance Company's cross motion for summary judgment to the extent ofdeclaring that plaintiff Zurich American Insurance Company's policy is primary to Arch'sinsurance policy, that Arch's policy is excess to Zurich's policy, that Arch is not obligated todefend Pav-Lak in the underlying personal injury action, and that the $1 million deductible in theArch policy applies to the underlying action, unanimously modified, on the law, to declare thatthe Arch policy is primary to the Zurich policy, that the Zurich policy is excess to the Archpolicy, and that Arch is obligated to defend and indemnify Pav-Lak in the underlying action, andotherwise affirmed, without costs.
The additional insured coverage endorsement of Arch's policy extends coverage to injuriessustained by the sub-subcontractor's employee, because those injuries arose out of the operationsor work of the subcontractor (see Tishman Constr. Corp. of N.Y. v CNA Ins. Co., 236AD2d 211 [1997]; Consolidated Edison Co. of N.Y. v Hartford Ins. Co., 203 AD2d 83,83-84 [1994]). Thus, Arch was required to disclaim coverage. Arch's disclaimer letter dated May12, 2005 was effective as against Pav-Lak because Pav-Lak received a copy of it (see Schlott v Transcontinental Ins. Co.,Inc., 41 AD3d 339 [2007], lv denied 9 NY3d 817 [2008]), and, further, thegrounds of disclaimer were stated with sufficient specificity (see Realm Natl. Ins. Co. v Hermitage Ins. Co., 8 AD3d 110[2004]). However, Arch's 45-day delay in disclaiming coverage was unreasonable as a matter oflaw. There was no need for an investigation, because the basis for the disclaimer was readilyapparent from Zurich's tender letter, which Arch received on March 28, 2005 (see West 16thSt. Tenants Corp. v Public Serv. Mut. Ins. Co., 290 AD2d 278 [2002], lv denied 98NY2d 605 [2002]; McGinley v OdysseyRe [London], 15 AD3d 218 [2005]).
By failing to give Pav-Lak timely notice of its disclaimer, Arch waived its reliance on the[*2]Ranger Steel exclusion as a basis for disclaiming coverage(see Markevics v Liberty Mut. Ins. Co., 97 NY2d 646, 648-649 [2001]). In any event,however, resolving the ambiguity of the language of the exclusion against Arch, the exclusiondoes not apply to Pav-Lak (see Belt Painting Corp. v TIG Ins. Co., 100 NY2d 377, 383[2003]).
Arch did not waive the $1 million deductible in its policy, because the deductibleendorsement does not bar coverage or implicate policy exclusions and therefore is not subject tothe time requirements for disclaiming coverage under Insurance Law § 3420 (d) (seePower Auth. of State of N.Y. v National Union Fire Ins. Co. of Pittsburgh, 306 AD2d 139[2003]). Nor is the endorsement a warranty under Insurance Law § 3106 (a), since itcontains no condition precedent to coverage.
In its contract with Pav-Lak, defendant B & J Welding & Iron Works agreed to namePav-Lak as an additional insured on a primary basis and agreed that Pav-Lak's own generalliability insurance would be excess only and noncontributory to B & J's policy. In accordancewith that contract, B & J obtained the Arch policy, which contained an additional insuredendorsement providing coverage to any entity that B & J was contractually required to insure forliability arising out of B & J's work or operations. This additional insured endorsementunambiguously applied to Pav-Lak (see e.g. Tishman Constr. Corp. of N.Y. v American Mfrs.Mut. Ins. Co., 303 AD2d 323, 324 [2003]). Pav-Lak's commercial general liability policy,the Zurich policy, provided that its coverage would be excess over "[a]ny other primary insuranceavailable to you covering liability for damages arising out of the premises or operations for whichyou have been added as an additional insured by attachment of an endorsement." Thus, theZurich policy is excess to the Arch policy (see id.). Concur—Lippman, P.J.,Sweeny, Catterson, Acosta and Renwick, JJ.