Late Notice of Occurrence -- 4 1/2-Month Delay Found Unreasonable As a Matter of Law

CGL – LATE NOTICE – 4 1/2-MONTH DELAY BY LAW FIRM INSURED FOUND UNREASONABLE AS A MATTER OF LAW – NO GOOD FAITH BELIEF IN NON-LIABILITY
Avery & Avery, P.C. v. American Ins. Co.
(2nd Dept., decided 5/13/2008)

Plaintiff law firm leased an office building in Brooklyn from an out-of-possession landlord. On March 24, 2004, a client of the insured law firm's subtenant, fell as he descended the steps from the second floor to the first floor of the building. The injured party, Verrone, said something that day to the firm's principal about the "bannister not going down to the bottom." Verrone was removed from the building by paramedics and died a few weeks later. An employee of the insured law firm knew this, and the firm's principal further acknowledged that she was aware that Verrone's nephew came to the premises to take photographs of the scene of the accident and that his family was "exploring the possibility of a claim."

On July 2, 2004, an attorney for Verrone's estate notified the landowner of the accident and advised the landowner to notify its insurance carrier. On August 10, 2004, the plaintiff's insurance broker forwarded a notice of the claim to the defendant, the plaintiff's insurance carrier. On August 17, 2004, an insurance adjuster for the defendant insurer telephoned the plaintiff's principal. In his affidavit, the adjuster claimed that the plaintiff's principal informed him that Verrone's nephew came to the premises to take pictures a few days after the accident. The plaintiff's principal did not deny this assertion.

On September 10, 2004 (one month after first notice), American Insurance Company disclaimed coverage on the ground that it did not receive timely notice of the claim. Plaintiff law firm then brought this DJ action, seeking defense and indemnification coverage in relation to the underlying personal injury and wrongful death action brought by Verrone's estate. American moved for summary judgment on the ground that the plaintiff failed to notify it of the claim as soon as practicable, and plaintiff cross-moved for summary judgment, claiming it had a reasonable belief in nonliability.

In REVERSING the Supreme Court's denial of American's cross motion for summary judgment, the Second Department noted:

* * * If the insured did not know about the accident, or had a "reasonable belief in nonliability," a delay in giving notice will be excused (citation omitted). However, the insured has the burden of showing the reasonableness of the excuse (id.). The issue is whether the insured had a reasonable basis for a belief that no claim would be asserted against it (citation omitted).

Here, the defendant established, as a matter of law, that the plaintiff did not have a reasonable belief that no claim would be asserted against it. The plaintiff had possession of the building, knew of the accident and that injuries were sustained on the day the accident occurred, and knew, within days of the accident, that Verrone's family was contemplating a claim. The delay of more than four months in notifying the defendant of the claim was unreasonable as a matter of law (see Evangelos Car Wash, Inc. v Utica First Ins. Co., 45 AD3d 727). In opposition, the plaintiff failed to raise a triable issue of fact.

The plaintiff asserts that the underlying action has no merit. However, at issue here is not whether the plaintiff reasonably believed that any claim brought by Verrone or on his behalf would lack merit. Rather, the issue is whether the plaintiff reasonably believed that no claim would be asserted against it (citations omitted; emphasis added).

Once again, a New York appellate court has pointed out that an insured's subjective assessment and belief that a potential claim would lack legal merit is not the relevant inquiry. Instead, it is whether the insured reasonably believed that no claim would be asserted against it.