Greater Explication of Late Notice to Excess Insurer

CGL – EXCESS INSURANCE – LATE NOTICE
Insurance Corp. of N.Y. v. United States Fire Ins. Co.
(1st Dept., decided 6/9/2009)

When an excess liability insurance policy requires notice of how, when and where an occurrence took place, the names and addresses of injured parties and witnesses, and the nature and location of any injuries or damage, letters, faxes or emails providing anything less will not satisfy the notice requirement.  So says the First Department in this decision.

BFC Construction Corp. has a $1M/$2M CGL policy with plaintiff, Inscorp, and an excess liability insurance policy with U.S. Fire.  For the 2001-2002 policy period, settlements and judgments had reduced the $2 million aggreggate limit to $800,000, and three claims -- Dagati, Torres and Regolodo -- remained open on the policy for that policy period.  On behalf of Inscorp., third-party claims adminstrator Ward North America notified U.S. Fire of the upcoming Dagati trial by email on March 9, 2006.  On March 16, 2006, Ward North America faxed to U.S. Fire a letter that it had sent to BFC on March 15, advising of the Torres action, notifying BFC that "based upon occurrences, offenses, claims or suits which have been reported to INSCORP and to which this insurance may apply, the General Aggregate Limit is likely to be used up in the payment of judgments or settlements", and enclosing a copy of the summons and complaint in the Regolodo action.  On April 20, 2006, Ward North America sent U.S. Fire a tender letter stating that the primary policy was likely to be exhausted and that the excess policy would then be implicated.  Eight days later, U.S. Fire disclaimed any obligation to defend or indemnify BFC in light of the late notice in the Torres and Regolodo, and rejected Ward's tender in the Torres case.

Inscorp. brought this action for a declaration that its policy had been exhausted and that U.S. Fire was required to defend and indemnify BFC in Regolodo. It also sought $375,000, the amount it had allegedly overpaid in the Torres settlement, and defense costs related to the Regolodo action.   Both parties eventually moved for summary judgment, which were denied.  While the motion court found that BFC Construction Corp., had given late notice of the Torres and Regolodo claims to U.S. Fire, the court also deemed U.S. Fire's disclaimer untimely, based on the court's determination that U.S. Fire had received notice on March 16, 2006.

In REVERSING the denial of U.S. Fire's cross motion for summary judgment, the three justice majority of the First Department held:

However, the record establishes that US Fire actually received proper notice on April 20 rather than March 16. Pursuant to the terms of its excess policy with US Fire, BFC was required to provide US Fire "prompt written notice of an occurrence, which might result in a claim." Notice was to include how, when and where the occurrence took place; the names and addresses of injured parties and witnesses; and the nature and location of any injury or damage. "An insurer's obligation to cover its insured's loss is not triggered unless the insured gives timely notice of loss in accordance with the terms of the insurance contract" (Power Auth. of State of N.Y. v Westinghouse Elec. Corp., 117 AD2d 336, 339 [1986], citing Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436 [1972]; see also Travelers Ins. Co. v Volmar Constr. Co., 300 AD2d 40 [2002]). Accordingly, US Fire's disclaimers, issued eight days after receiving notice, were timely as a matter of law (see e.g. Public Serv. Mut. Ins. Co. v Harlen Hous. Assoc., 7 AD3d 421, 423 [2004]).

 In a concurring memorandum, Justices Nardelli and Catterson agreed with the appellate result, but "but wr[o]te separately because [they] believe[d] that the issue of notice obligations under the primary policy of insurance and under an excess policy of insurance requires greater explication."  Justice Catterson's concurring memorandum concludes:

The excess policy, as set forth above, plainly required that notice include far more detail about the occurrences at issue than was supplied by the primary carrier. Indeed, the record contains no evidence that the primary carrier ever complied with the bulk of the notice requirements. The March 16th fax to U.S. Fire merely attached the summons and complaint in Regolodo and a letter concerning Torres. The March 14th email asked U.S. Fire to attend the trial in Dagati. The March 9th email to U.S. Fire merely notified U.S. Fire that Dagati was scheduled for trial. None of these communications satisfied the policy provisions.

It should also be noted that none of these communications put U.S. Fire on notice that the excess policy would be implicated, or even that it was "reasonably likely" that the excess policy would be involved. See Long Is. Light. Co. v. Allianz Underwriters Ins. Co., 24 AD3d 172, 173, 805 N.Y.S.2d 74 (1st Dept. 2005), lv. dismissed, 6 NY3d 844, 814 N.Y.S.2d 77, 847 N.E.2d 374 (2006). Thus, the only possible notice to U.S. Fire was the tender letter of April 20, 2006. Given the paucity of information conveyed to U.S. Fire prior to that time as well as the age of the claims involved, U.S. Fire's disclaimer was timely.