In an insurance coverage action pending in the S.D.N.Y., Hunt Construction Group (Hunt) contends that Berkley Assurance Company wrongfully denied defense coverage for claims arising out of the renovation of Hard Rock Stadium (home to the Miami Dolphins and Miami Hurricanes football teams).
The stadium owner, South Florida Stadium LLC (SFS), hired Hunt to serve as the construction manager for the renovation project. Hunt subcontracted with Alberici Constructors Inc. (Alberici) to design and fabricate roof structures for the stadium.
Hunt and SFS sued Alberici over its work on the project. In March 2017, Alberici asserted counterclaims against Hunt and SFS. In May 2018, SFS sought defense and indemnification from Hunt with respect to Alberici’s coverage claims.
Hunt is insured under claims made and reported professional liability insurance policies issued by Berkley with policy periods from June 15, 2016 to June 15, 2017 (with an automatic extended reporting period through August 14, 2017) and from July 15, 2017 to June 15, 2018. Hunt notified Berkley of Alberici’s counterclaim on July 20, 2017 (within the extended reporting period of the 2016-2017 policy) and of SFS’s indemnity claim on June 5, 2018 (within the 2017-2018 policy period).
Berkley filed the coverage action arguing that there is no coverage because (i) Hunt did not provide timely notice of the Alberici claim during the 2016-policy period and (ii) the Contractual Liability Exclusion bars coverage for both claims.
In its summary judgment brief, Hunt contends that Berkley is obligated to pay defense costs, as notice was timely and the Contractual Liability Exclusion does not apply. Hunt correctly cites established New York law that the duty to defend is broader than the duty to indemnify and arises whenever a demand or complaint suggests “a reasonable possibility of coverage” or “contains any facts or allegations which bring the claim even potentially within the protection purchased.”
Hunt notified Berkley of the Alberici claim before the policy extension had expired. Thus, the claim fell within the scope of coverage under “both the plain language and reasonable interpretation” of the 2016-17 policy. Under the automatic extended reporting period, once the policy period ended, Hunt had an additional 60 days within which to notify Berkley of the Alberici claim. Because Hunt provided notice within the extended reporting period, notice was timely.
In addition, the Contractual Liability Exclusion does not apply because Berkley cannot establish that the allegations fall exclusively under the exclusion. In other words, the claims by Alberici and SFS contain allegations supporting non-contractual claims covered by the policy. This is sufficient to activate Berkley’s coverage under the broad duty to defend standard. In addition, Berkley’s excessively broad application of the exclusion would render the promised professional services liability coverage illusory.
This case is another example of an insurer improperly seeking to deny or restrict coverage, incorrectly relying on notice and contractual liability exclusions in their policies. Policyholders should not hesitate to challenge such wrongful coverage denials. For instance, at the duty to defend stage, if a complaint or demand includes any facts or allegations, which bring the claim even potentially within coverage, the insurer must defend. As Hunt contends here, where it is clear that notice was provided within the reporting period of a claims made and reported policy, a policyholder should not accept the insurer’s denial premised on untimely notice. Further, if the claim contains facts or allegations supporting claims other than those excluded under the contractual liability exclusion (or any other exclusion), then the duty to defend will have been activated and the insurer’s reliance on the exclusion is misplaced. We will provide an update on the S.D.N.Y’s decision in this case when it is issued.