Ordered that the order is affirmed, with costs, and the matter is remitted to the Supreme Court, Kings County, for the entry of a judgment in the second third-party action declaring that Employers Insurance of Wausau, a Mutual Company, is obligated to defend and indemnify Leskay Construction Company, the third-party defendant second third-party plaintiff, in the instant action.
The general liability policy issued by the second third-party defendant, Employers Insurance of Wausau, a Mutual Company (hereinafter Wausau), to the defendant third-party plaintiff Schiavone Construction Co., Inc. (hereinafter Schiavone) named the third-party defendant second third-party plaintiff Leskay Construction Services, Inc., sued here as Leskay Construction Company (hereinafter Leskay), as an additional insured. In this action to recover damages for, among other things, personal injuries sustained by an employee of Leskay, Wausau has denied coverage of Leskay, based upon the employee bodily injury exclusion in the policy.
Wausau, which had defended Leskay and Schiavone in a separate personal injury action arising from the same incident, received timely notice of the incident as well as tender of the defense of Leskay in this action. However, Wausau did not disclaim coverage until almost seven years after being tendered Leskay's defense by another of Leskay's general liability insurers.
Where, as here, the policy would provide coverage but for a policy exclusion, the insurer must disclaim coverage, and the failure to do so in a reasonably timely manner estops the insurer from disclaiming coverage based on the exclusion ( see, Matter of Aetna Life Cas. v. Boucher, 238 A.D.2d 414; Hebert v. Staltac Assocs., 231 A.D.2d 675; Hanover Ins. Co. v. Suffolk Overhead Door Co., 207 A.D.2d 428; Insurance Law § 3420 [d]).
Consequently, Wausau is estopped from denying coverage under the policy's employee exclusion and, since Leskay is a named insured on Wausau's policy, the anti-subrogation rule applies ( see, North Star Reins. Corp. v, Continental Ins. Co., 82 N.Y.2d 281; Pennsylvania Gen. Ins. Co. v. Austin Powder Co., 68 N.Y.2d 465). The trial court properly dismissed the third-party complaint, which sought contribution from Leskay, and properly granted summary judgment to Leskay on its second third-party complaint, which sought a declaration that Wausau was obligated to defend and indemnify Leskay in, the instant action.
The appellants' remaining contentions are without merit.
Bracken, J.P., Pizzuto, Friedmann and Luciano, JJ., concur.