162 A.D.3d 7
N.Y. App. Div.2018Background
- Nadkos, Inc. was general contractor on a Brooklyn construction project; Chesakl Enterprises was a subcontractor that purchased a CGL policy from Preferred Contractors Insurance Company Risk Retention Group LLC (PCIC) naming Nadkos as an additional insured.
- Subcontractor Mirkamel Vafaev was injured; he sued Nadkos, Chesakl, and others in a Kings County personal injury action alleging negligence and Labor Law violations.
- Colony (Nadkos’ primary CGL carrier) tendered defense to Chesakl and PCIC in August 2015; PCIC denied coverage to Chesakl on September 1, 2015 and disclaimed coverage to Nadkos on November 16, 2015 based on policy exclusions.
- Nadkos asserted PCIC failed to timely disclaim under N.Y. Ins. Law § 3420(d)(2) and thus waived coverage defenses; PCIC responded it is a Montana-domiciled risk retention group (RRG) and that the LRRA preempts § 3420(d)(2).
- Nadkos sued for a declaration that PCIC must defend and indemnify it; Supreme Court granted PCIC summary judgment, holding the LRRA preempts § 3420(d)(2); Nadkos appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a nondomiciliary RRG must comply with N.Y. Ins. Law § 3420(d)(2) disclaimer timing | Nadkos: § 3420(d)(2) is an "unfair claim settlement practice" under § 2601, which N.Y. may require RRGs to follow, so PCIC waived defenses by late disclaimer | PCIC: LRRA preempts § 3420(d)(2); as a Montana-domiciled RRG it need not follow New York's disclaimer timing rule | Court: LRRA preempts § 3420(d)(2) as applied to nondomiciliary RRGs; PCIC has no duty to defend or indemnify Nadkos |
Key Cases Cited
- Wadsworth v. Allied Professionals Ins. Co., 748 F.3d 100 (2d Cir. 2014) (describes LRRA’s allocation of regulatory authority between chartering and nondomiciliary states)
- KeySpan Gas E. Corp. v. Munich Reins. Am., Inc., 23 N.Y.3d 583 (N.Y. 2014) (explains § 3420(d)(2)’s heightened disclaimer rule and its effect on coverage rights)
- Desrosiers v. Perry Ellis Menswear, LLC, 30 N.Y.3d 488 (N.Y. 2017) (statutory interpretation: give effect to plain statutory text)
- Izzo v. Manhattan Med. Group, 164 A.D.2d 13 (1st Dept. 1990) (every word in a statute must be given meaning)
- DaimlerChrysler Corp. v. Spitzer, 7 N.Y.3d 653 (N.Y. 2006) (statutory text as primary indicator of legislative intent)