A disclaimer letter denying coverage sent on behalf of a Liberty Mutual Group unit was sufficient, a federal appeals court held Tuesday, in affirming a lower court ruling on the insurer’s behalf in litigation that focused on the letter’s adequacy.

In November 2007, Niagara County in New York contracted with Buffalo-based T.G.R. Enterprises Inc. for a construction project at Niagara County Community College, according to Tuesday’s ruling by the 2nd U.S. Circuit Court of Appeals in New York in County of Niagara et al. v. Netherlands Insurance Co., Excelsior Insurance Co. et al.

T.G.R. obtained insurance including an umbrella excess liability policy issued by Liberty Mutual unit Excelsior Insurance Co., and named the county as an additional insured. The policy included a “Designated Automobile Liability Exclusion” that excluded from coverage any injury or damage raising out of “owned automobiles.” 

The umbrella policy specified that “the words ‘you’ and ‘your’ refer to the Named Insured shown in the Declarations, and any other person or organization qualifying as a Named Insured under this policy,” the ruling said.

In May 2008, a T.G.R. employee who was injured while riding in the bed of a truck owned by the company filed suit against the county in state court.

Peerless Insurance Co., Excelsior’s immediate parent company, sent a letter to T.G.R. disclaiming coverage under the umbrella policy that quoted key portions of the auto exclusion provision and cited relevant facts concerning the circumstances of the employee’s injury, the ruling said.

The county filed suit in U.S. District Court in Buffalo seeking defense costs and indemnification, charging that the disclaimer letter was insufficient because it was not addressed to the county, did not explicitly reference the county’s tender letter, did not provide a full copy of the auto exclusion provision, and “failed to include quotations of pertinent definitions.” The district court ruled in the insurer’s favor.

It was upheld by a unanimous three-judge appeals court panel. “We are unpersuaded,” said the opinion. “As the district court noted, the Disclaimer Letter ‘expressly identified and disclaimed coverage’ under the Auto Exclusion.”

In addition, its subject line can only be interpreted as referring to the claim, and while the letter may not have been addressed to the county, a copy was provided to the county’s attorney.

The letter also “unambiguously notified” the county of the reason for denying coverage, the ruling said.

The county had also charged the terms “you” and “your” in the auto exclusion were ambiguous, because it could have referred to either T.G.R. or the county. 

“The terms ‘you’ and ‘your’ were expressly defined” as referring to T.G.R., the ruling said, in addressing the charge the terms were ambiguous, and affirming the lower court’s ruling.

Attorneys in the case had no comment.