Courts in many jurisdictions generally recognize that coverage for an otherwise uncovered claim cannot be created through the doctrine of waiver.  A New York appellate court has recently taken a different approach. In Titan Indus. Servs. Corp. v. Navigators Ins. Co., 2024 NY Slip Op 00041 (App. Div. Jan. 4, 2024), the New York Appellate Division, First Department, concluded that a general liability policy provided additional insured coverage to a contractor because the insurer failed to timely disclaim coverage. The coverage action arose from injuries sustained by an employee of a subcontractor on a jobsite. The employee filed a lawsuit against the general contractor (Titan). Titan sought additional insured coverage under an insurance policy issued by Navigators to the subcontractor through a tender issued by its broker and then, several months later, sought coverage through a tender Titan submitted directly to Navigators. The Navigators Policy contained a “Designated Persons or Entities” Exclusion that specifically excluded coverage for Titan. Navigators, however, waited over three months to deny coverage for Titan direct tender.  Titan initiated coverage litigation and argued that Navigators failed to timely disclaim coverage under New York law. Specifically, Insurance Law § 3420(d)(2) requires insurers to provide written notice of the disclaimer as soon as reasonably possible after receiving a tender for coverage. When the demand for coverage is obvious and does not require an investigation, some courts have found that 30 days is unreasonable. When an insurer fails to timely disclaim coverage under this law, they waive the right to deny coverage.

The trial court overseeing the coverage litigation ruled that Navigators’ failure to timely disclaim coverage was irrelevant as Titan was never an insured under the policy. According to the court, “the policy language provides no coverage for Titan whatsoever, not simply as a result of a specific policy exclusion where Titan would otherwise be covered.” Titan appealed the result, arguing that the New York law on timely denials of coverage applied to the endorsement in this case.

The Appellate Division sided with Titan, reversed the trial court’s ruling, and concluded that Navigators could not deny coverage based on its untimely coverage determination. The Court held that because Navigators sought to deny coverage based on a policy exclusion, it was required under Insurance Law § 3420(d)(2) to provide written notice of the disclaimer as soon as reasonably possible after receiving Titan’s tender. The Court noted that the application of the exclusion was obvious and did not require an investigation. Accordingly, the Court held that Navigators’ unexplained delay in disclaiming coverage – seven months after the first tender and almost three months after the second – was unreasonable as a matter of law. Although the appellate court concluded that Navigators had a duty to defend Titan, it held that Titan was not entitled, at this stage of the litigation, to a declaration that Navigators had a duty to indemnify Titan.