Insured's 8 1/2-Month Late Notice Excused by Insurer's 56-Day Delay in Disclaiming

CGL – UNTIMELY DISCLAIMER – INSURANCE LAW § 3420(D)
Salvatore Bellavia & Franchised Distribs., Inc. v. Seneca Ins. Co., Inc.
(2nd Dept., decided 11/30/2010)

If the million reasons given in Burlington Ins. Co. v. Galindo & Ferreira Corp. were not convincing enough, this case again demonstrates the coverage-fatal consequence of a liability insurer not complying with New York Insurance Law § 3420(d).

On April 26, 2005, plaintiffs provided first notice to their insurer, Seneca Insurance Company, of a personal injury claim that stemmed from an accident that had occurred on August 10, 2004. Fifty six days later, on June 21, 2005, Seneca disclaimed coverage on the ground that the plaintiffs had not notified it of the occurrence as soon as practicable.

In AFFIRMING the lower court's grant of summary judgment to the insureds, the Second Department, Appellate Division, agreed that Seneca had failed to issue a timely disclaimer:

Insurance Law § 3420(d) requires an insurer to provide a written disclaimer of coverage "as soon as is reasonably possible" (Insurance Law § 3420[d][2]).  An insurer's failure to provide notice of disclaimer as soon as is reasonably possible precludes it from disclaiming coverage, even where the insured's own notice of the incident is untimely (see Matter of New York Cent. Mut. Fire Ins. Co. v Aguirre, 7 NY3d 772, 774; First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 67).  "The timeliness of an insurer's disclaimer is measured from the point in time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage" (Tex Dev. Co., LLC v Greenwich Ins. Co., 51 AD3d 775, 778; see First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d at 68-69; Matter of New York Cent. Mut. Fire Ins. Co. v Steiert, 68 AD3d 1120, 1121).

Here, the plaintiffs made a prima facie showing of their entitlement to judgment as a matter of law declaring that the defendant is obligated to defend and indemnify them in the underlying action by establishing that, under the circumstances, the defendant did not provide a written disclaimer of coverage as soon as reasonably possible (see Insurance Law § 3420[d][2]; Mid City Constr. Co., Inc. v Sirius Am. Ins. Co., 70 AD3d 789, 789-790; Tex Dev. Co., LLC v Greenwich Ins. Co., 51 AD3d at 778). In opposition, the defendant, which had the burden of justifying its delay in providing the written notice of disclaimer (see First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d at 69), failed to raise a triable issue of fact.