In Sierra v. 4401 Sunset Park, the Court of Appeals affirmed a ruling by the Second Department that Scottsdale’s disclaimer to GNY, which had tendered an additional insured claim on behalf of its insured, 4401 Sunset Park, was invalid under 3420(d) because the disclaimer was not sent to 4401 Sunset Park. 

The Court based its decision on a literal reading of section 3420(d) requiring an insurer to give written notice of a disclaimer “to the insured.”   In doing so, the Court concluded that while GNY had acted on the insured’s behalf in sending notice of the claim to Scottsdale, that did not make GNY the insured’s agent for all purposes or for the purpose relevant in this situation—receipt of a notice of disclaimer.  According to the Court, GNY’s interests were not necessarily aligned with its insureds’ in this litigation because there might have been a coverage dispute between GNY and its insureds or plaintiff’s claim might have exceeded GNY’s policy limits.

Because, in the court’s view, the insureds had their own interests at stake separate from GNY, they were entitled to notice delivered to them or at least to an agent, such as their defense counsel, owing a duty of loyalty solely to them.

The Court distinguished Excelsior where the tendering insurer was seeking to recoup a settlement it had paid, thus clearly making it the real party in interest.  The insurer-to-insurer response passed muster under 3420(d) in that case.  To the extent Excelsior could be read to stand for the general proposition that notice to an additional insured’s liability insurer serves as notice to the additional insured under 3420(d), the Court held that it should not be followed.