Late Notice of Occurrence -- 5-Month Delay Found Unreasonable

CGL – LATE NOTICE – 5-MONTH DELAY UNREASONABLE AS A MATTER OF LAW – NO GOOD FAITH BELIEF IN NON-LIABILITY
Kaesong Corp. d/b/a Feel Health Beauty Supply, Inc. v. United National Specialty Ins. Co.
(EDNY decided 4/24/2008)

In Kaesong Corp. d/b/a Feel Health Beauty Supply, Inc. v. United National Specialty Ins. Co., 2008 U.S. Dist. LEXIS 34254 (EDNY decided 4/24/2008), the court granted summary judgment to the United National, the GL insurer, holding that the insured's 5-month delay in reporting an accident with injury on the insured's property was unreasonable as a matter of law. A customer had fallen at the plaintiff insured's store on August 10, 2006. That same day, the store manager prepared a written report, which stated that the woman had fallen on her wrist and hit her head while in the store, two employees had assisted the woman following the fall, and that she had been taken by ambulance to a local hospital. The report also states that the woman told the employees that she had "lost her balance." The insured reported the accident to United National on January 8, 2007, approximately five months later, and United National disclaimed coverage on January 18, 2007 based on the insured's late notice.

In granting summary judgment to United National, the court note that "[f]ive months is an unreasonable amount of time to delay notification to an insurer of a potential claim." Citing to New York state court decisions, the court observed that the duty to give notice arises when, from the information available relative to the accident, an insured could glean a reasonable possibility of the policy's involvement. "The reasonableness of the belief does not turn on whether the insured believes he will ultimately be found liable for the injury, but whether he has a reasonable basis for a belief that no claim will be asserted against him." "New York courts have consistently found that knowledge that an injured person had to be taken from a store's premises by ambulance should indicate a reasonable possibility that an insurance policy might be implicated by that accident. "

Notably, the court found that because the insured had not submitted any evidence of further inquiry into its potential liability, the court could not accept the insured's claim that it had a reasonable belief in its nonliability. As Coverage Counsel has said before -- a good faith belief in non-liability is something active, not passive. It requires an actual belief, based on inquiry and determination, that no claim will be brought against the insured. Assuming that no claim will be brought simply because the insured hears nothing further will not satisfy most courts, including the Eastern District.