Insured's Five-Month Delay in Notifying Its Liability Insurer of Assault in Insured's Bar Found Unreasonable As a Matter of Law

CGL – LATE NOTICE – FIVE-MONTH DELAY IN REPORTING – AWARENESS OF FACTS SUGGESTING REASONABLE POSSIBILITY OF CLAIM
Tower Ins. Co. of N.Y. v. Miles
(1st Dept., decided 6/1/2010)

Approximately one week after a patron of his bar had assaulted another patron on the premise, the insured became aware of the incident, but did not notify his commercial liability insurer, Tower, of the incident until five months later.  Tower disclaimed liability coverage with respect to an underlying personal injury action based on the insured's asserted failure to notify Tower of any potential claims "as soon as practicable".  Tower then commenced this declaratory judgment action and unsuccessfully moved for summary judgment on its late notice defense.

In REVERSING the New York County Supreme Court's order denying Tower's motion, the Appellate Division, First Department, held:

Where, as here, the contract of insurance requires the insured to notify its liability carrier of a potential claim "as soon as practicable," such requirement acts as a condition precedent to coverage (Great Canal Realty Corp. v Seneca Ins. Co., Inc, 5 NY3d 742, 743 [2005]), and the insured's failure to provide timely notice of an occurrence vitiates the contract as a matter of law (see Argo Corp. v Greater N.Y. Mut. Ins. Co., 4 NY3d 332, 339 [2005]). Here, Miles became aware approximately one week after the incident that a patron of his bar had potentially assaulted another patron on his premises. Because defendants were knowledgeable of facts that suggested a reasonable possibility of a claim against them and failed to conduct a sufficient inquiry into the circumstances, their five-month delay in notifying plaintiff of the incident was unreasonable as a matter of law (see e.g. Tower Ins. Co. of N.Y. v Christopher Ct. Hous. Co., 71 AD3d 500 [2010]; SSBSS Realty Corp. v Public Serv. Mut. Ins. Co., 253 AD2d 583 [1998]). Miles' claimed belief of nonliability on the basis that none of his employees were involved in the incident was not reasonable under the circumstances (see e.g. Tower Ins. Co. of N.Y. v Lin Hsin Long Co., 50 AD3d 305, 308 [2008]).

Since no mention is made of any prejudice requirement, the commercial liability policy under which the insureds sought coverage was likely issued or renewed prior to January 17, 2009, when New York's new prejudice requirement for late notice disclaimers went into effect.