Monday, March 9, 2009

First Department Holds that Injured Party Did Not Act Diligently in Identifying and Timely Notifying Landlord's Liability Insurer of Accident

Tower Ins. Co. of N.Y. v. Jaison John Realty Corp.

(1st Dept., decided 3/3/2009)

This case is not especially remarkable for its holding that an insured's 5-month delay in providing notice of an accident is unreasonably late as a matter of law. No, Tower Insurance Company has been obtaining summary judgment in New York courts on similarly short delays -- 7 months, 9 months and 9 months -- for some time. This case is remarkable for its holding that the injured party herself did not act with due diligence in identifying and notifying Tower of the accident.

I blogged this case when New York Supreme decided it against Tower last June. While finding that the insured's notice was unreasonably late, the motion court ruled that "under the circumstances, [the insured party's] counsel was reasonably diligent in his efforts to ascertain the identity of John's insurer."

New York 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. "The sufficiency of notice by an injured party is governed not by mere passage of time but by the means available for such notice." Appel v Allstate Ins. Co., 20 AD3d 367 (1st Dept. 2005), quoting National Grange Mut. Ins. Co. v Diaz, 111 AD2d 700, 701 (1985).

In this case, counsel for the injured party wrote to the insured landlord three months after the accident and commenced this action one month later. In MODIFYING the order appealed from to hold that the injured party had not timely exercised her independent right under Insurance Law § 3420(a)(3) to place Tower on notice of the accident, the First Department ruled:
Concerning the declaration in favor of Dias and against Tower, the December 20, 2006 letter from Dias's counsel to John advised John to notify his insurer of the accident, and that if counsel did not hear from John's insurer or legal representative within 20 days, Dias would commence an action. A month later, on or about January 23, 2007, having received no response and still unaware of the identity of John's insurer, Dias commenced suit against John, and, less than two weeks later, Tower received notice of the accident when John forwarded a copy of the summons and complaint. This is insufficient under Insurance Law § 3420(a)(3). Dias never attempted to ascertain the identity of John's insurer and merely relied on correspondence to John (Tower Ins. Co. of N.Y. v Lin Hsin Long Co., 50 AD3d 305 [2008]).
If counsel's letter had not merely advised the landlord to notify its liability insurer but had also asked the landlord for that insurer's identity, would the result in this case been different? Perhaps, especially in light of the First Department's statement that "Dias never attempted to ascertain the identity of John's insurer[.]"

Of course, New York liability insurers will soon be required to prove prejudice from notification delays of less than two years in order to sustain a late notice disclaimer. Accidents occurring on and after January 17, 2009 submitted for coverage under New York liability policies issued or renewed on and after that date will trigger the new prejudice requirement. See, End of an Era -- The Last Hours of New York's No Prejudice Rule. Under that new rule, liability insurers will be hard pressed to demonstrate coverage disqualifying prejudice from a four or five month delay in accident notification. But for the "old" cases, this holding supports the view that an injured party who sends out only a "put your liability insurer on notice" letter without also asking for that insurer's identity or otherwise taking steps to ascertain that insurer's identity does not satisfy the policy's notice of accident or occurrence requirement.

Post Script ~~ Max Gershweir, whose office represented Tower in this case, answers my question about whether the result would have been different had the injured party's attorney also asked for the identity of the insurer in his letter to the landlord:
Changing the wording in the claim letter in the manner you suggest certainly would have helped the claimant, as it would have signaled that the claimant was seeking to give independent notice rather than relying solely on the insured to do it, but it probably would not have changed the outcome. The other necessary element -- although a couple of decisions in the last few years seem to have dispensed with it -- is that the claimant, once armed with the insurer's identity, actually give notice of some kind to the insurer within a reasonable time thereafter, which did not occur here. The 1st Dep't majority in the Lin Hsin Long decision, another Tower case handled by my office, which the Jaison John court cited, made clear that this other element is indeed required.

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