Markevics v. Liberty Mutual Insurance Co., 97 N.Y.2d 646 (2001)

An insurance company must provide timely written notice of disclaimer to the injured party when denying coverage based on a policy exclusion, even if the insurer notifies the insured.

Summary

Alexandra Markevics sued Liberty Mutual seeking a declaration that the insurer was obligated to defend and indemnify Kerry O’Brien under a homeowner’s policy for injuries Markevics sustained in an accident caused by an intoxicated driver who O’Brien allegedly served while working at her family’s bar. Liberty Mutual disclaimed coverage based on a “business pursuits” exclusion but only notified O’Brien, not Markevics. The New York Court of Appeals held that because the denial of coverage was based on a policy exclusion, Insurance Law § 3420(d) required the insurer to provide timely written notice of the disclaimer to the injured party (Markevics), and failure to do so invalidated the disclaimer.

Facts

Kerry O’Brien worked as a bartender at O’Bie’s Bar, a family business owned and operated by her parents. O’Brien lived at her parents’ home, which was insured under a “deluxe” homeowner’s policy issued by Liberty Mutual. O’Brien allegedly served liquor to Sandro Perez at the bar while Perez was visibly intoxicated. Perez then drove his car into a utility pole, injuring his passenger, Alexandra Markevics. Markevics sued O’Brien for negligence.

Procedural History

Markevics sued O’Brien for personal injuries. O’Brien tendered her defense to Liberty Mutual. Liberty Mutual disclaimed coverage based on a business pursuits exclusion, but only notified O’Brien. Markevics then commenced a declaratory judgment action against Liberty Mutual, arguing the disclaimer was invalid because it was not sent to her. Supreme Court granted summary judgment to Markevics. The Appellate Division affirmed. Liberty Mutual appealed to the New York Court of Appeals.

Issue(s)

Whether an insurance company must provide timely written notice of disclaimer to the injured party when denying coverage based on a policy exclusion under Insurance Law § 3420(d).

Holding

Yes, because when a claim falls within the coverage terms of an insurance policy but is denied based on a policy exclusion, Insurance Law § 3420(d) requires the insurer to provide timely written notice of the disclaimer to the injured party.

Court’s Reasoning

The Court of Appeals reasoned that under Insurance Law § 3420(d), a disclaimer is unnecessary when a claim does not fall within the coverage terms of an insurance policy. However, a timely disclaimer is required when a claim falls within the coverage terms but is denied based on a policy exclusion. The court emphasized that Liberty Mutual’s denial of coverage was based solely on the business pursuits exclusion, triggering the requirements of Insurance Law § 3420(d). The court cited Worcester Ins. Co. v. Bettenhauser, 95 N.Y.2d 185, for the proposition that a disclaimer is required when a claim falls within the coverage terms but is denied based on a policy exclusion. Because Liberty Mutual failed to provide timely written notice of its disclaimer to Markevics, the injured party, the attempted disclaimer was defective, and summary judgment was properly granted to the plaintiff. The Court stated, “Conversely, a timely disclaimer pursuant to Insurance Law § 3420 (d) is required when a claim falls within the coverage terms but is denied based on a policy exclusion”. The Court also rejected Liberty Mutual’s argument that the claim did not arise on the insured premises, stating that the policy provides personal liability coverage without geographical limitation. Finally, the Court declined to consider the argument that O’Brien’s actions were not an “occurrence” because it was not raised in the lower courts.