880 F.3d 73
2d Cir.2018Background
- On April 29, 2013 Risen Foods’ van, driven by employee Petr Tkach, collided with a truck driven by Jason Tanner; Tanner sued Risen and Tkach for serious injuries.
- Risen had commercial auto liability coverage with State Farm (1,000,000 per occurrence); State Farm defended and offered nearly policy limits to settle.
- Citizens issued Risen a Businessowners Policy (BOP) (1,000,000) and an Umbrella Policy (2,000,000), both bearing the same policy number; the umbrella’s Schedule of Underlying Policies listed the BOP but left the auto carrier line blank.
- The BOP included an auto exclusion for owned autos but contained a “Hired Auto and Non‑Owned Auto Liability” endorsement that provided coverage only for hired or non‑owned autos.
- Risen notified Citizens by phone shortly after the accident; Citizens disclaimed umbrella coverage because the State Farm auto policy was not listed, and later sued for a declaration it had no duty to defend or indemnify; the district court held Citizens must defend and indemnify under both policies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Risen gave timely notice under the policies | Notice sufficient because Risen called Citizens and provided the shared policy number | Notice sufficient; call identified Citizens as general liability carrier | Notice was timely — phone call gave adequate notice to both policies |
| Whether the BOP (with endorsement) covers an accident involving an owned vehicle | BOP’s endorsement and BOP should be read together to afford coverage or, if excluded, Citizens waived disclaimer by not timely disclaiming | Endorsement defines covered autos as only hired or non‑owned; owned vehicle is not included, so there is no coverage (lack of inclusion) and no disclaimer required | No coverage under the BOP for an owned vehicle because the endorsement’s definitions exclude owned autos; therefore no disclaimer was required and Citizens had no duty to defend or indemnify under the BOP |
| Whether the umbrella policy provides coverage (including "drop down") when underlying BOP does not cover the owned auto | Umbrella should "drop down" and defend because the BOP did not apply (and Citizens’ disclaimer under the umbrella was inadequate) | Umbrella covers only "autos" to which underlying insurance applies; because BOP does not cover owned autos, the umbrella also does not cover them | Umbrella does not apply: its definition of "covered auto" is limited to autos covered by underlying insurance, so it provides no coverage for Risen’s owned van |
| Whether Citizens’ disclaimers were ineffective under NY Ins. Law § 3420(d)(2) because they failed to mention the auto exclusion | Disclaimers were ineffective because insurer did not timely disclaim coverage based on the auto exclusion | No timely disclaimer required where there is no coverage by reason of lack of inclusion | Disclaimers unnecessary/ineffective issue is moot because there was no coverage to disclaim (lack of inclusion), so Citizens had no duty to give timely exclusionary notice |
Key Cases Cited
- NGM Insurance Co. v. Blakely Pumping, Inc., 593 F.3d 150 (2d Cir.) (endorsement defining coverage as only hired/non‑owned autos excludes owned vehicles; lack of inclusion means no duty to disclaim)
- Zappone v. Home Insurance Co., 55 N.Y.2d 131 (N.Y. 1982) (no disclaimer required where there is no coverage by reason of lack of inclusion)
- Worcester Insurance Co. v. Bettenhauser, 95 N.Y.2d 185 (N.Y. 2000) (discussion of problems distinguishing exclusion from lack of inclusion)
- Hasbani v. Nationwide Mut. Ins. Co., 98 A.D.3d 563 (N.Y. App. Div.) (umbrella/underlying schedule labeling can affect drop‑down coverage analysis)