No Prejudice Lives in the Property Insurance World

Important point of clarification, thanks to my partner, Scott Storm.

The Direct DJ/Late Notice/Prejudice bill that was just passed on Monday this week applies only to third-party personal injury, wrongful death and property damage claims and New York liability insurance policies that insure against losses comprising those claims. It does not apply to first-party property insurance claims or policies.

What this means is that property insurers should not be bound by the new law and required to prove prejudice (material impairment in "the ability of the insurer to investigate or defend the claim") in order to sustain a late notice disclaimer of a first-party property coverage claim.

This is an important distinction. Insurers that will be amending their policy language to comply with the new law (presuming that it will be signed) should note this distinction and, unless they want to extend the prejudice requirement to first-party coverages, make changes only to liability coverage policy language subject to and mandated by Insurance Law § 3420(a).