Traub Lieberman Attorneys Meryl R. Lieberman and Craig Rokuson Obtain Summary Judgment for Liability Insurer Holding That Denial Was Timely and Proper Under New York Insurance Law § 3420

Traub Lieberman Straus & Shrewsberry LLP founding partner Meryl R. Lieberman and associate Craig Rokuson recently obtained summary judgment for a liability insurer in the United States District Court for the Southern District of New York. The coverage case involved a challenge to the timeliness of the insurer’s denial under the Employer’s Liability Exclusion, which bars coverage to all insureds and additional insureds for a bodily injury suffered by the employee of any insured. The tender on behalf of the additional insured identified the named insured as the employer of the underlying plaintiff. However, the complaint was silent as to the identity of the underlying plaintiff. The court held that in this circumstance, an investigation was necessary and proper. The coverage investigation commenced immediately after receipt of the tender, and within fourteen days yielded Worker’s Compensation documentation identifying the underlying plaintiff’s employer as the named insured. The insurer disclaimed coverage seventeen days after obtaining the Worker’s Compensation documentation, and 31 days after receiving the tender.

The court held that the investigation was conducted promptly and the disclaimer issued timely based on the insurer’s receipt of dispositive information. The court observed that where such investigation is necessary, time periods of up to two months have been held to be timely as a matter of law. The court also noted that two national holidays (Thanksgiving and Christmas) were observed during the time period between receipt of the tender and issuance of the disclaimer.

The court also held that notwithstanding the timing issue, the insurer properly asserted the Operations Not Covered Endorsement, which limits coverage to certain classifications, In this regard, the court reasoned that the Operations Not Covered Endorsement defines the scope of coverage in the first instance, and Insurance Law § 3420 is inapplicable to such coverage defense.