Employer's Belief That The Injured Employee's Exclusive Remedy Was Under The Workers' Compensation Law Is Not Reasonable And Does Not Excuse A Failure To Give Timely Notice
October, 2011
In National Union Fire Insurance Company of Pittsburgh, PA v. Great American E&S Insurance Company, 86 A.D.3d 425, 926 N.Y.S.2d 508 (1st Dep't 2011), the Appellate Court reversed the trial court's decision and held that a subcontractor's liability insurer had no duty to defend or indemnify the named insured, finding that notice to the insurer over a year after the accident was untimely.
In National Union, Solar Electric Systems, Inc. ("Solar") contracted with nonparty West-Fair Electric Contractors ("West-Fair") to provide electrical work for a construction project undertaken by a site owner, Ethical Culture Fieldstone School ("ECFS") in November, 2005. Id. 425. Under the contract with West-Fair, Solar agreed to defend and indemnify ECFS and a project manager, Tishman ("Tishman"), and also to procure insurance for both entities. Id. 425. Solar obtained a commercial general liability policy from Great American E&S Insurance Company ("Great American"), naming ECFS and Tishman as additional insureds on its Certificate of Insurance. Id. 425.
In July, 2006, Solar's employee was injured at the project site when she tripped over an extension cord and fell. She was taken by ambulance to the hospital and was advised to remain out of work for over a month. Id. 425. On the day of the accident, Solar completed an "Employer's Report" and "Supervisor's 24-Hour Incident Report" detailing the accident and medical attention received by the employee. Id. 425. Solar faxed both reports to the workers' compensation carrier, its insurance broker and Tishman, and filed the appropriate form with the New York State Workers' Compensation Board and the employee started receiving workers' compensation benefits in July, 2006. Id. 425-26.
In June, 2007, the employee commenced a personal injury action against ECFS and Tishman. Id. 426. In August, 2007, ECFS and Tishman impleaded Solar as a third-party defendant. Id. Tishman forwarded the complaint to Great American in June, 2007, and Solar forwarded the third-party complaint to Great American in August, 2007. ECFS did not provide notice to Great American. Id. Great American refused to provide insurance coverage to all three entities. Id.
ECFS and Tishman filed a declaratory judgment action against Solar and Great American, seeking, among other things, a declaration that Great American was obligated to defend and indemnify them in the personal injury action commenced by Solar's employee. Solar cross-claimed against Great American for a declaration that it was obligated to defend and indemnify it in the personal injury action. Solar argued that it did not timely notify Great American of the occurrence because it believed that the employee's exclusive remedy was under the Workers' Compensation Law and that it could not be held liable for her injuries.
The Appellate Court rejected Solar's argument and held that its belief in no liability was unreasonable under the circumstances. In so finding, the Court analyzed the facts that the employee was injured on property owned by ECFS and managed by Tishman, that Solar agreed to defend and indemnify ECFS and Tishman under the contract, and that the employee was taken by ambulance to the hospital and remained out of work for over a month.
The Court also distinguished this case from the case cited by the trial court and Solar where the insurance agent specifically advised the insured that there was no indication a claim could be brought against it. The Court found that there was no evidence that Solar was advised by any insurance agent as to no liability.
Learning Point: New York courts have held that the employer's belief that the injured employee's exclusive remedy was under the Workers' Compensation Law is not reasonable and does not excuse a failure to give timely notice. However, the National Union case suggests that the results would have been different if the named insured sought clarification of coverage from its counsel or insurance agent.Back to New York CM Report of Recent Decisions (2011v3) 2011 Volume 3 Table of Contents
