Disclaimer Issued 45 Days After First Notice Held Untimely As a Matter of Law

CGL – LATE NOTICE – 45-DAY UNTIMELY DISCLAIMER – INSURANCE LAW § 3420(D)
Tex Dev. Co., LLC v. Greenwich Ins. Co.
(2nd Dept., decided 5/13/2008)

I am periodically asked how long is too long for a liability insurer to issue a disclaimer letter after first notice, so as not to run afoul of Insurance Law § 3420(d). In this case, 45 days apparently was too long.

On October 10, 2003, a construction worker was killed in an accident on plaintiff insured's property. Three days later, Tex Development notified its insurance agent of the accident and asked that notice be provided to Greenwich, Tex Development's CGL insurer, but the agent failed to do so.

On April 5, 2005 (approximately a year and a half after the accident), the worker's estate commenced a wrongful death action against Tex Development, and on April 18, 2005, Tex Development finally notified Greenwich directly for the first time of the accident and lawsuit. Greenwich sent what presumably was a reservation of rights letter advising Tex Development that it was investigating "notice and liability issues."

Forty-five days later, on June 2, 2005, Greenwich disclaimed coverage on the ground that it had not been provided with timely notice of the accident. Tex Development's insurance policy required it to notify Greenwich "as soon as practicable of an 'occurrence' or an offense which may result in a claim."

Tex Development commenced this DJ action for coverage and moved for summary judgment. In MODIFYING the lower court's denial of that motion, the Second Department held:

* * * Tex Development * * * established, prima facie, that under the circumstances, Greenwich failed to provide a written disclaimer of coverage as soon as reasonably possible (citation omitted). In response, Greenwich, which had the burden of explaining its delay in providing the written notice of disclaimer (citation omitted), failed to raise a triable issue of fact.

New York courts have been especially strict with insurers that disclaim only for late notice which should have been apparent to the insurers when they first received notice, even though established New York case law holds that an insurer should be given enough time to investigate and evaluate all potential coverage defenses. In this case, Greenwich's untimely disclaimer, in violation of Insurance Law § 3420(d), excused Tex Development's one and a half year delay in notifying Greenwich of the occurrence. Such is the coverage rehabilitating consequence of an untimely disclaimer.