AIU INSURANCE COMPANY v. INVESTORS INSURANCE COMPANY (2005)

Order, Supreme Court, New York County (Louis B. York, J.), entered March 17, 2004, which, upon reargument, vacated a prior order, same court and Justice, entered May 28, 2003, and declared defendant obligated neither to co-insure plaintiff Arnell Contracting nor to reimburse plaintiff AIU Insurance for defense and indemnification, unanimously affirmed, without costs.

Defendant, which directly insured Arnell, did not receive any notice of the underlying accident for five years.   AIU Insurance, which also insured Arnell under a “wrap-up” policy issued to plaintiff New York City School Construction Authority, undertook the costs of defense of the personal injury lawsuit.   AIU made a demand to defendant to co-insure Arnell after the litigation had been ongoing for four years.

 While an insurer must give timely notice of disclaimer to its insured even where, as here, the insurer has not in the first instance received timely notice of the accident (see Matter of Nationwide Mut. Ins. Co. v. Steiner, 199 A.D.2d 507, 605 N.Y.S.2d 391 [1993] ), the duty to disclaim as soon as is reasonably possible (Insurance Law § 3420[d] ) is not triggered where, as here, the request is for contribution by a co-insurer (Tops Mkts. v. Maryland Cas., 267 A.D.2d 999, 1000, 700 N.Y.S.2d 325 [1999] ).  “The purpose of Insurance Law § 3420(d) is to protect the insured, the injured person, ‘and any other interested party who has a real stake in the outcome’ from prejudice resulting from a belated denial of coverage” (Top Mkts., id., quoting Excelsior Ins. Co. v. Antretter Contr. Corp., 262 A.D.2d 124, 127, 693 N.Y.S.2d 100 [1999] ).   That the protection of the statute is inapplicable to a co-insurer's request for contribution is demonstrated by the facts of this case.   AIU received notice of the accident, conducted an investigation, undertook the defense of the lawsuit and managed the defense on its own for four years.   Manifestly, it has not been prejudiced by any late disclaimer by Investors.