54-Day Delay in Issuing Late Notice Disclaimer Found to Be Unreasonable as a Matter of Law

CGL – UNTIMELY DISCLAIMER – LATE NOTICE – INSURANCE LAW § 3420(D)(2) – PROOF OF MAILING
Mid City Constr. Co., Inc. v. Sirius Am. Ins. Co.
(2nd Dept., decided 2/9/2010)

Waiting 54 days to issue a late notice disclaimer is not "as soon as is reasonably possible", as required by Insurance Law § 3420(d)(2), holds the Appellate Division, Second Department, in this decision.  In AFFIRMING Kings Supreme's award of summary judgment to the insured on its cross claim for declaratory judgment, the Second Department also found that Sirius American Insurance Company failed to raise a triable issue of fact with sufficient proof that it had mailed an earlier disclaimer letter -- only 11 days after having gained sufficient knowledge of facts entitling it to disclaim -- by certified mail, return receipt requested.  An affidavit from a claims representative who did not have personal knowledge of the mailing of the earlier disclaimer letter, coupled with the certified mail receipt, standing alone, were found insufficient to raise a triable issue of fact as to actual mailing of the earlier disclaimer letter:

The defendant Finaly General Contracting Corp., a/k/a Finaly General Contractors, Inc. (hereinafter Finaly), established its prima facie entitlement to judgment as a matter of law on its cross claim for declaratory relief against the defendant Sirius America Insurance Company (hereinafter Sirius) by demonstrating that Sirius did not disclaim coverage "as soon as is reasonably possible" (Insurance Law § 3420[d][2]; see Sirius Am. Ins. Co. v Vigo Constr. Corp., 48 AD3d 450, 452). Finaly showed that Sirius had "sufficient knowledge of facts entitling it to disclaim" by June 10, 2005, at the latest, and that Sirius did not disclaim until August 3, 2005 (see First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 66). In opposition, Sirius failed to raise a triable issue of fact as to whether it sent an earlier disclaimer letter on June 21, 2005, by certified mail, return receipt requested (see Rael Automatic Sprinkler Co., Inc. v Schaefer Agency, 52 AD3d 670, 673). "Generally, proof that an item was properly mailed gives rise to a rebuttable presumption that the item was received by the addressee'" (New York & Presbyt. Hosp. v Allstate Ins. Co., 29 AD3d 547, 547, quoting Matter of Rodriguez v Wing, 251 AD2d 335, 336). "The presumption may be created by either proof of actual mailing or proof of a standard office practice or procedure designed to ensure that items are properly addressed and mailed" (Residential Holding Corp. v Scottsdale Ins. Co., 286 AD2d 679, 680). Sirius offered no evidence as to its standard office practices for mailing disclaimer letters, and the affidavit of a claims representative was insufficient to raise a triable issue of fact since he did not have personal knowledge of the mailing of the disclaimer letter (see New York & Presbyt. Hosp. v Allstate Ins. Co., 29 AD3d at 547; Tracy v William Penn Life Ins. Co. of N.Y., 234 AD2d 745, 748). The certified mail receipt, standing alone, was insufficient to raise a triable issue of fact as to actual mailing (see New York & Presbyt. Hosp. v Allstate Ins. Co., 29 AD3d at 548; Matter of State Farm Mut. Auto. Ins. Co. [Kankam], 3 AD3d 418, 419; cf. Westchester Med. Ctr. v Liberty Mut. Ins. Co., 40 AD3d 981, 983). Although issues of fact exist as to whether Finaly provided notice of an occurrence "as soon as practicable" (M & N Mgt. Corp. v Nationwide Mut. Ins. Co., 307 AD2d 257, 258), Sirius's "failure to provide notice of disclaimer as soon as is reasonably possible precludes effective disclaimer, even where the insured's own notice of the incident is untimely" (Tex Dev. Co. v Greenwich Ins. Co., 51 AD3d 775, 778; see Osterreicher v Home Mut. Ins. Co. of Binghamton, N.Y., 272 AD2d 926, 927). 

Under New York Insurance Law § 3420(d)(2), an untimely disclaimer or denial will, in effect, excuse an insured's late notice and preclude the assertion of coverage-negating policy exclusions or conditions for bodily injury or death claims arising from New York accidents.  With the prevalence of email as a business communication tool, might liability insurers consider obtaining consent and sending disclaimer and denial letters to their insureds via email as well as mail?  See, NYSID OGC Opinion No. 07-08-17, Electronic distribution by insurers of insurance policies, forms, and bills to insureds ("The Department has consistently encouraged the use of electronic transactions in insurance where there is consent on the part of the insured to enter into an electronic transaction, except to the extent that statutory requirements cannot be satisfied by an electronic transmittal.")  But for better proof of the mailing of the June 21, 2005 letter, Sirius might not have been found to owe defense and indemnification to its insured in the underlying personal injury action.

For other untimely disclaimer decisions discussed on this blog, click here.