Wednesday, December 21, 2011

... and Sometimes the Bar Eats You

Tower Ins. Co. of N.Y. v. NHT Owners LLC

(1st Dept., decided 12/20/2011)

Those of you who read the advance sheets know that Tower Insurance Company has successfully defended many late notice disclaimers, especially in the Appellate Division, First Department, where Tower is headquartered.  Reporting delays of 3 months, 5 months, 5 months, 7 months, 9 months, and 9 months to Tower have been ruled unreasonable as a matter of law, entitling Tower to summary judgment.  Most of the reported case law to date, of course, was decided under New York's "old" no-prejudice rule; under most New York liability policies issued, renewed or modified on and after January 17, 2009, insurers must demonstrate that they were prejudiced by their insureds' delayed reporting in order successfully to disclaim coverage based on such late notice.

In this latest episode of late notice limbo, Tower disclaimed liability coverage to the defendant insureds in this case based on their 62-day delay in notifying Tower of an accident in which an individual fell from a ladder in an elevator at defendants' premises.  The insureds were aware of the accident on the day it occurred.  Supreme Court, New York County (Marcy S. Friedman, J.) granted the defendant insureds' cross motion for summary judgment against Tower in this declaratory judgment action, and Tower appealed.

In unanimously AFFIRMING the order appealed from, with costs, the Appellate Division, First Department, found it unnecessary to reach the issue of whether the insureds' 62-day reporting delay was timely because Tower's 33-day delay in disclaiming was, in the First Department's opinion, untimely as a matter of law:
A liability policy that requires an insured to provide notice of an occurrence to its insurer "as soon as practicable" obligates the insured to give notice of the occurrence within a reasonable period of time (Great Canal Realty Corp. v Seneca Ins. Co., 5 NY3d 742, 743 [2005]). However, we need not reach the question of whether, under all the circumstances, the insureds' notice of claim, 62 days after the occurrence, was timely, where they conducted an inquiry into the underlying accident, and believed there was no liability (see Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436, 441 [1972]) because the court properly held that the notice of disclaimer, after a 33-day period, was untimely as a matter of law (see Ins Law § 3420[d]; First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 68-69 [2003]; see e.g. West 16th St. Tenants Corp. v Public Serv. Mut. Ins. Co., 290 AD2d 278 [2002], lv denied 98 NY2d 605 [2002]). The insurer's sole ground for the disclaimer of coverage was the insured's delay in notifying it of the occurrence, which was readily apparent at the time of the notice of claim (see First Fin. Ins. Co., 1 NY3d at 69). 
The New York courts have recognized a number of excuses to an insured's late notice of occurrence:
  • reasonable, good faith belief in non-liability
  • de minimus injury
  • ignorance of coverage
In effect, a liability insurer's untimely disclaimer of coverage can also operate to excuse an insured's late notice.  New York Insurance Law § 3420(d)(2) requires that for bodily injury or death claims arising out of New York accidents, liability insurers must disclaim liability or deny coverage in writing "as soon as is reasonably possible" to the insured and the injured person or any other claimant.

How soon is that?  In this case, 33 days was not as soon as reasonably possible.  But that's not the New York state record.  30 days is.  Where the ground or grounds for the liability insurer's disclaimer are "readily apparent" from the time of the insured's first notice of claim, any delay by the insurer in disclaiming liability or denying coverage will be scrutinized by the New York courts.  Here are the low water marks in New York for what have been found to be untimely disclaimers as a matter of law:

30 daysWest 16th Street Tenants Corp. v. Public Service Mut. Ins. Co., 290 AD2d 278 (1st Dept. 2002)
37 days2833 Third Ave. Realty Assocs. v. Marcus, 12 AD3d 329 (1st Dept. 2004)
41 daysMatter of Nationwide Mut. Ins. Co. v. Steiner, 199 AD2d 507(2nd Dept. 1993)
48 daysFirst Fin. Ins Co. v. Jetco Contr. Corp., 1 NY3d 64 (Ct. Apps. 2003)
60 daysMilbank Housing Dev. Fund v. Royal Indem. Co., 17 AD3d 280 (1st Dept. 2005)

No comments: