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New York First Department: A Classification Limitation of Building Operations in an Endorsement Defined the Scope of Coverage and Was Not An Exclusion, So NY Ins Law Sec. 3420(d)(2) Did Not Apply

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Black Bull Contracting, LLC v. Indian Harbor Ins. Co., 135 A.D.3d 401, 23 N.Y.S.3d 59 (N.Y. App. Div. 2016). The intermediate appellate court held that a listing of building operations in an Endorsement defined the scope of coverage, not an exclusion. Black Bull was a subcontractor insured under a CGL policy issued by Indian Harbor. One of its employees was injured while doing demolition work. An Endorsement provided that “this insurance applies only to operations that are classified or shown on the Declarations.” Black Bull relied on the fourth one, “Contractors — subcontracted work – in connection with construction, reconstruction, repair or erection of buildings – Not Otherwise Classified — uninsured/underinsured.” The Appellate Court, applying New York law, held for the Insurer. It found the “classification limitation” Endorsement” defined the scope of coverage, and thus was not an exclusion. The Court rejected Black Bull’s argument that the fourth classification could reasonably be interpreted to extend coverage to liability arising from any work subcontracted to Black Bull, but rather applied to liability arising from the work that Black Bull subcontracts to other contractors. It said that Black Bull’s interpretation would render the classification limitation meaningless because it would extend Black Bull’s coverage to all of its contracting operations, not just the ones identified in the Endorsement. As a result of this ruling, the insurer had no liability even though its disclaimer, which came almost three months after the notice of claim, would have been untimely if Insurance Law Sec. 3420(d)(2) applied. That Section requires that disclaimers in claims involving bodily injury or death be made “as soon as reasonably possible.” The 1st Department applied prior Court of Appeals authority holding that the Section does not apply where there was “a lack of coverage in the first instance,” but only where there is “a lack of coverage based on an exclusion.”