The IIABNY Research Department frequently gets questions about denials of coverage for late notice. Questions of timely notice are complicated enough when the policy is a primary general liability form. It gets even trickier when the policy is a commercial umbrella or excess policy.
Roy Mura’s Coverage Counsel blog reported a New York appellate court decision handed down two weeks ago that shows just how careful an insured (and, by extension, that insured’s agent) must be when it comes to giving prompt notice. To quote Roy:
When an excess liability insurance policy requires notice of how, when and where an occurrence took place, the names and addresses of injured parties and witnesses, and the nature and location of any injuries or damage, letters, faxes or emails providing anything less will not satisfy the notice requirement. So says the First Department in this decision.
In this particular case, paid claims had shrunk the primary policy’s $2 million aggregate limit for the 2001-02 policy term to $800,000 with three claims still open in 2006. Foreseeing exhaustion of its limits, the primary insurer notified the excess insurer of the open claims. Almost immediately, the excess insurer denied coverage due to the late notice. When the primary insurer sued, the trial court denied the excess insurer’s motion to have the case dismissed. The New York Supreme Court’s Appellate Division, First Department, reversed the trial court’s decision. The court said that the excess insurer had not received the required information (“how, when and where the occurrence took place; the names and addresses of injured parties and witnesses; and the nature and location of any injury or damage”) in a timely fashion. Therefore, the insurer was within its rights to deny coverage.
In this case, it was an insurance company that lost in court. However, it could very easily be an insured who loses the next one, and it’s not a stretch to imagine the insured seeking recovery from the agent or broker on the account. The lesson: In the event of a loss, notify all insurers whose coverage may become involved and comply with the notice requirements in the policies.
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