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Southern District Reaffirms Additional Insured’s Independent Duty to Request Coverage

The Southern District reaffirms that a party seeking additional insured coverage has an independent and implied obligation to comply with the notice provisions of the insurance policy under which it is seeking such coverage in Liberty Insurance Underwriters, Inc. v. Great American Insurance Co., 2010 WL 3629470 (S.D.N.Y. 2010). 

In that action, plaintiff insurer sought additional insured coverage for its named insured, Arrow, under a general liability policy of insurance issued by defendant insurer to its own insured, Diamond.  Defendant first received notice of the Accident when it was advised by Arrow’s counsel that the insured party had sued Arrow; that Arrow had instituted a third-party action against Diamond; and that Diamond was in default. After defendant denied coverage to Diamond based on late notice, plaintiff and its insured sued defendant, asserting, among other things, that defendant’s denial of coverage as to Arrow was untimely. 

Specifically, plaintiff argued that its insured had no notice obligation to defendant because defendant’s policy only obligated named insureds to notify defendant of a claim or suit, and not additional insureds, and that Arrow’s notice to defendant of the third-party action against Diamond constituted notice of a request for additional insured coverage.

The Southern District rejected both of these arguments, holding that the obligation to timely notify an insurer of an occurrence and request insurance coverage for that occurrence was one implied by all insurance contracts, regardless of whether the insurance contract itself imposed such a requirement.  The Southern District also held that Arrow’s notification to defendant of a third-party claim against Diamond could not be considered notice by Arrow of a request for additional insured coverage from defendant and that because Arrow’s first notice that it sought additional insured coverage from defendant was its suit against defendant, Arrow’s notice was untimely, and defendant had no additional insured obligations to it accordingly.