Wade Clark Mulcahy LLP

In Wesco Ins. Co. v. SR Delco C.S.M. Inc., 226 A.D.3d 630 (N.Y. App. Div. 2024), the New York Appellate Division, First Department was faced with a familiar insurance coverage fact pattern: an insurance carrier issued a policy to a general contractor, which hired an interior carpentry subcontractor and, during the subcontractor’s work, an employee of the subcontractor was injured and sued the subcontractor and general contractor. The general contractor sought insurance coverage from its insurance company in the form of a defense against the injured employee’s claim.

In Wesco v. Delco, the insurer initially provided the insured with a defense. However, several months into the defense, the insurer disclaimed coverage based on the insurance policy’s classification codes. The policy included language limiting its coverage to specified types of construction work. Although the covered classification codes included interior carpentry, the insurer argued that the insured general contractor was not itself performing interior carpentry work, and therefore the general contractor was not entitled to coverage. The court agreed and affirmed the trial court’s grant of summary judgment in favor of the insurer because the claim for coverage fell outside the scope of the policy.

The First Department also noted that a disclaimer of coverage under a policy classification code is not an exclusion and is therefore not subject to the timeliness requirements of New York Insurance Law § 3420(d)(2).