Vista Engineering Corp. v. Everest Indem. Ins. Co. et al. 2021 N.Y. 2021 N.Y. App. Div. LEXIS 127
Out-of-state insurers confronted with an argument that a disclaimer was late under New York Ins. Law 3420(d)(2) were quick, and right, to look to the statutory requirement that the policy be “issued for delivery” to avoid the consequences of failing to timely disclaim coverage. However, that language was changed to “issued or delivered” in 2008.
Then came the Court of Appeals decision in Carlson v American Intl. Group, Inc., 30 N.Y.3d 288 30 N.Y.3d 288 (2017), where the Court concluded “issued or delivered” is facially broader than “issued for delivery.” In interpreting this language, the Court determined that the defendant was “located in” New York “because it has a substantial business presence and creates risks in New York.” The question of what constitutes a “substantial business presence” was left unanswered.
The First Department has now waded into these waters. Everest insured East Coast, a New Jersey company, and delivered the policy to East Coast in New Jersey. Vista qualified as an additional insured on the policy. One of East Coast’s employees fell off a ladder while working at a project in New York City and sued Vista.
Vista tendered to Everest. Eighty-seven days after receiving notice, Everest disclaimed coverage to Vista pursuant to an Action Over exclusion. Vista, in turn, sued Everest asserting its disclaimer was untimely under New York Ins. Law 3420(d)(2).
The First Department stated that N.Y. Ins. Law §3420(d)(2) applies (1) a policy covers risks located in NY; and (2) the insured is located in NY by having a “substantial business presence.” Carlson, supra.,.
Vista contended that East Coast, a New Jersey company, had a “substantial business presence” in New York for the purposes of N.Y. Ins. Law §3420. Everest opposed. The trial court and Appellate Division found East Coast had a substantial business presence in New York, and consequently, is “located in” New York for the purposes of N.Y. Ins. Law §3420(d)(2).
East Coast maintained a space in New York to stage its work and store equipment, all of East Coast’s workers at the time of the accident were hired from a New York-based painting union, and East Coast’s work on the subject project took two years to complete and cost approximately $2 million. These contacts with New York were sufficient to be a “substantial business presence” in New York. Therefore, the prompt disclaimer requirements of N.Y. Insurance Law §3420(d)(2) applied to defeat the disclaimer.
In futuro: The Carlson decision has significant implications for insurers who issue policies outside New York where there is a bodily injury/death in New York. For New York accidents, insurers who issue policies outside New York will need to consider whether N.Y. Ins. Law §3420(d)(2)’s stringent timing requirements may apply. Also, New York does not recognize reservations of rights in bodily injury and death cases. Failure to comply will result in the disclaimer being stricken where the insured has a “substantial business presence” in New York.
This decision suggests that courts will consider factors such as (1) whether the business had a physical location in New York (such as space for staging or storage); (2) New York labor force; (3) duration of the project in New York; and (4) cost of the project. Most significantly, one project in New York was enough to find a “substantial presence”.
This should be a stark warning for out-of-state insurers to timely disclaim for a bodily injury claim in New York, or be forced to litigate whether the insured has a substantial business presence in New York.