June 2026 New York Insurance Coverage Update

Second Department Finds No Coverage Because Underlying Claims Do Not Fall Within Policy’s Classification Limitation Endorsement

Two workers employed by Steel Fab NY, Inc., were injured performing steel erection work at a construction project. Each filed a bodily injury action against the project’s owner and general contractor who, in turn, filed third-party actions against Steel Fab, a subcontractor. The owner and general contractor tendered their defense and indemnification to AIX Specialty Insurance Company, Steel Fab’s insurer, seeking additional insured coverage. AIX disclaimed coverage based upon its policy’s Classification Limitation Endorsement, among other reasons, and then filed an action against the owner, general contractor, and Steel Fab seeking a declaration of no coverage for the actions. AIX moved for summary judgment and Mt. Hawley Insurance Company, the excess insurer for the owner and general contractor, moved for leave to intervene as a defendant and oppose AIX’s motion. The Supreme Court, Kings County, granted both motions, and the owner, general contractor, and Mt. Hawley appealed. The Appellate Division, Second Department, affirmed, finding that AIX had “demonstrated, prima facie,” that the underlying actions “fell outside the policy’s scope of coverage by submitting, among other things, affidavits describing the scope of Steel Fab’s work, the insurance policy and underwriting file, and a bill of particulars indicating that the injuries occurred during steel erection operations, which were not within the policy’s covered risk classifications.” The court explained that the work listed in the Classification Limitation Endorsement “unambiguously limited the policy’s coverage to claims arising from fabrication operations performed at the insured’s shop and did not encompass on-site erection work,” which was at issue in the actions. The court also found that a timely disclaimer pursuant to Insurance Law § 3420(d) was not necessary “because the claims in the underlying actions did not fall within the scope of the policy’s coverage in the first instance due to the policy’s Classification Limitation Endorsement.” The court rejected appellants’ argument that the broad limitation rendered the policy illusory. [AIX Specialty Ins. Co. v. Steel Fab NY, Inc., 249 A.D.3d 814 (2d Dep’t May 13, 2026)].

Eastern District Finds No Coverage Because Of Privity Requirement In Additional Insured Endorsement

The owners of a penthouse in a Manhattan co-op retained M2 Contracting Corporation to renovate their home. M2 agreed in its contract to procure primary and excess liability insurance and to name 90 Riverside Drive Corporation, the owner of the co-op, as an additional insured. M2 also agreed to indemnify 90 Riverside for injury or damage arising out of the renovation. M2’s contractor was injured when he fell from a ladder while working on the renovation and filed a bodily injury action against both 90 Riverside and M2 seeking damages for his injuries. On summary judgment in the underlying action, the court granted 90 Riverside contractual indemnification from M2. 90 Riverside was defended in the underlying action by its own insurer, Insurance Company of Greater New York, and tendered its defense and indemnification to Mt. Hawley Insurance Company, M2’s excess insurer, seeking additional insured coverage under its policy. Mt. Hawley disclaimed coverage, and GNY filed an action seeking a declaration that Mt. Hawley has a duty to defend and to indemnify 90 Riverside in the underlying action as a contractual indemnitee of M2 and an additional insured under the Mt. Hawley policy. Mt. Hawley moved to dismiss GNY’s action for failure to state a claim, and the District Court for the Eastern District of New York granted Mt. Hawley’s motion. The court found that Mt. Hawley’s additional insured endorsement requires contractual privity between 90 Riverside and M2 “for 90 Riverside to qualify as an additional insured under the Mt. Hawley policy” and there is no such privity because M2’s contract was with the penthouse owners not 90 Riverside. The court explained that M2’s failure to obtain insurance for 90 Riverside as it was required to do under its contract “does not modify the [Mt. Hawley] policy to say something that it does not.” The court also rejected GNY’s argument that Mt. Hawley must indemnify 90 Riverside because the underlying court granted 90 Riverside contractual indemnification against M2. The court explained that “whether 90 Riverside is owed contractual indemnification from M2 under the contract between M2 and the penthouse owners is a separate and distinct question from whether 90 Riverside is entitled to coverage from the Mt. Hawley policy.” [Insurance Co. of Greater N.Y. v. Mt. Hawley Ins. Co., 26-cv-445 (BMC), 2026 WL 1469450 (E.D.N.Y. May 26, 2026)].