Three-Month Delay in Notifying Liability Insurer of Tenant's Assault Found Untimely -- Insured Failed to Make Reasonable Inquiry Into Incident

CGL – ASSAULT OF TENANT – LATE NOTICE – GOOD-FAITH BELIEF IN NONLIABILITY – REASONABLE INQUIRY
Tower Ins. Co. of N.Y. v. Christopher Ct. Hous. Co.
(1st Dept., decided 3/16/2010)

The New York courts have repeatedly held that the reasonableness of an insured's asserted good-faith belief in nonliability excuse to late notice depends on whether and to what extent the insured has inquired into the circumstances of the accident or occurrence.  In this case, the insured's failure to obtain a copy of the related police report was found, as a matter of law, to show a lack of reasonable inquiry. 

A residential tenant in defendant's building was allegedly assaulted in the hallway outside her apartment. The incident report generated by the security guard on duty, which was submitted to defendant's employee, the building's property manager, reported that the tenant claimed she was "grabbed" by the assailant, police and emergency medical personnel were called to the scene, and there was "no evidence" of the assailant. The police report, which the property manager did not obtain, reported that the tenant stated that an unknown assailant came out from the stairwell, grabbed her, pulled her hair, knocked off her glasses and that her arm was scratched; that the tenant was going through an "anxiety attack," was "very distraught," and was taken to the hospital by emergency medical personnel; and that the officers canvassed the premises but were unable to find the assailant.

Tower Insurance Company's first notice of the incident was its receipt of the tenant's summons and complaint against defendant some three months after the incident. Tower disclaimed liability coverage based on the insured's late notice of the incident and commenced this declaratory judgment action.   In opposition to Tower's motion for summary judgment, the insured argued that it had a good-faith belief in nonliability.  New York Supreme denied Tower's motion and it appealed. 

In REVERSING the lower court's order and granting summary judgment to Tower, the First Department found that by not obtaining a copy of the incident's police report, the insured had not made a reasonable inquiry into the incident and possibility of a claim:

Defendant argues that its delay in giving notice was reasonable where there was no evidence that the tenant was knocked down by the assailant, security staff told the property manager that a problematic rear door was closed at the time of the incident, and the property manager observed the tenant to be uninjured and was rebuffed by the tenant when she attempted to talk to her about the incident.  Such circumstances, as a matter of law, do not show a reasonable inquiry.  The property manager knew that the building's security staff did not speak to the tenant and had learned of the incident from the responding police officers.  Had the property manger inquired whether a police report had been filed, as she should have, she would have learned of details that were not reported by the security staff, including that the tenant was in distress and had been taken from the building by ambulance. Coupled with her personal knowledge of a potentially hazardous condition — a fire exit door that was sometimes found propped open or held open from the insider by tenants — the police report would have alerted the property manager to the possibility of a claim (see SSBSS Realty Corp. v Public Serv. Mut Ins. Co., 253 AD2d 583 [1998]).

Had the claim been submitted for coverage under a liability policy issued or renewed on or after January 17, 2009, Tower likely would have been required to demonstrate prejudice from the three-month delay in notice.  The absence of any mention of a prejudice requirement in this decision probably means that the late notice issue was decided under New York's "old" no prejudice rule of law.