CGL – LATE NOTICE – GOOD FAITH BELIEF IN NON-LIABILITY – NOTICE FROM INJURED PARTY
Tower Ins. Co. of New York v. Jaison John Realty Corp.
(Sup. Ct., New York Co., decided 6/17/2008)
In counseling insurer clients on late notice issues, we regularly remind them that not one but two late notice analyses and determinations need to be made in every case: one with respect to the insured's delay or failure in providing notice; and the second with respect to the injured party's or claimant's delay or failure.
The latter determination is needed because Insurance Law § 3420(a)(3) gives injured parties an independent right to notify tortfeasors' liability insurers of an accident or occurrence. The standard or test used to measure late notice by an injured party is, however, less stringent than the one applicable to insureds. Notice by an injured party, even if much later than what would be expected from an insured, will be deemed timely if the injured party is found to have acted with due diligence to identify the tortfeasor's liability insurer, and then have placed that insurer on notice as soon after learning that insurer's identity as possible.
In this case, the court found that while the insureds breached their policy obligation to provide Tower with timely notice of falldown accident of which they were immediately aware, Tower had not met its burden of showing that the injured party relied solely on the insured to give notice to Tower and failed to proceed diligently in giving notice of her claim directly to Tower.
- 9/17/2006 -- Dias falls down staircase in apartment building owned by insureds. Passerby calls 911. Paramedics arrive. Police arrive and cut off a piece of the staircase's railing in order to extricate Dias. Dias taken from scene to hospital ER where she was treated and released. Insured principal shareholder, John, finds staircase handrail missing later that day and calls the police. Receives a call back from the police, who inform him that someone named Dias had fallen on the staircase. Dias claims she called John from the hospital to tell him about her accident, but he said he already knew about it. John denies receiving such a call.
- 9/18/2006 -- John says he reached and spoke with Dias, but she never mentioned that she had fallen on the apartment's front step and been injured. Denies subsequently receiving a copy of the police report.
- 12/20/2006 -- Attorney for Dias writes to John advising that he had been retained to prosecute a personal injury claim. John denies receiving that letter.
- January 2007 -- John claims he first became aware of Dias's injuries when he received a copy of her summons and complaint. He immediately forwards those suit papers to Tower.
- 2/16/2007 -- Tower disclaims liability and denies coverage based on the insureds' late notice.
- 6/7/2007 -- Tower reiterates its late notice disclaimer after receiving a letter from John explaining that he did not report the incident on the date of occurrence because he believed Dias was making a false claim (Wait, so he was aware of Diaz's injuries?).
In denying Tower's motion as respects Dias, the injured party, however, the court held:
In this case, John admits that on the day of the occurrence he received notice from someone who identified himself as a police officer that someone named Dias had fallen on his premises and that a piece of railing was removed because of the falll. John‘s assertion that he did not know that anyone was injured is belied by his own statement that he knew that someone fell; Dias's testimony that she called John from the hospital to tell him that she fell and the accident report which states that the police officer contacted Matthew John by phone and notified him of the occurrence (Sander’s Aff., Ex. 3). Under the circumstances, even construing the facts most favorably to the insured, there is no evidence that would lead to a “reasonable belief” that the party who fell would not assert a claim and, with the facts in his possession, John had both the ability and the responsibility to investigate the outcome of the occurrence (citations omitted). John’s failure to investigate the occurrence was unreasonable as a matter of law.
Here, there has been no showing that Dias had reason to know that notice directly to Tower was required (citation omitted), and under the circumstances, her counsel was reasonably diligent in his efforts to ascertain the identity of John's insurer. Tower urges the court to hold that the efforts by Dias's attorney were inadequate as a matter of law. In light of the fact that her attorney contacted John approximately three months after the accident and commenced the lawsuit one month later, it cannot be said that Dias sat on her rights. Moreover, Tower disclaimed even before John's time to answer the complaint had expired. On February 12, 2007, four days before Tower sent its formal disclaimer letter, it sought, and received, the consent of
Dias's attorney to extend John's time to serve an answer to the complaint * * *. Tower acknowledged receipt of the complaint in its disclaimer letter of February 16, 2007 * * *. Dias's lawyer communicated directly with Tower regarding the litigation, and Tower participated in the litigation by requesting Dias's forbearance in permitting it the opportunity to file a late answer on John's behalf. Under these circumstances, it cannot be said that Tower has met its burden of showing that Dias, as the injured party, relied solely on the insured to give notice to Tower and failed to proceed diligently in giving notice of her claim directly to Tower.