New York law requires individuals to provide their insurance company with notice of an insurance claim as soon as practicable. For many years, the general rule of thumb was that notice by an insured would be considered timely if made within a month. Anything beyond 30 days was problematic, and any delay of more than three to four months would generally be considered inexcusable. Due to the harsh consequences of this law, it was amended relatively recently and now states that ?failure to give notice [as soon as practicable] . . . shall not invalidate any claim . . . unless the failure to provide timely notice has prejudiced the insurer?? Insurance Law ? 3420 (a)(5). In addition, that law provides that ?the insurer?s rights shall not be deemed prejudiced unless the failure to timely provide notice materially impairs the ability of the insurer to investigate or defend the claim.? Insurance Law ? 3420 (c)(2)(C). The failure to provide notice until after a default judgment had been entered has been deemed to prejudice the insurer because it loses its right to appear and interpose an answer, thus requiring it to shoulder the burden of moving to vacate the default judgment
Alternatively, New York law allows the injured person (in addition to the insured person) to notify the insurance company. However, when the injured person reports the claim, he too must provide notice within a reasonable time. Insurance Law ? 3420 (a)(3), requires the injured person to (a) show that he acted diligently in attempting to ascertain the identity of the insurer, and (b) once identified, expeditiously notify the insurer.
In the recent case, Castlepoint Insurance Company v. Anlovi Corp., a Manhattan trial court upheld a disclaimer of coverage by Castlepoint Insurance Company. The defendant, Anlovi Corporation, owned a building and was sued by several tenants. Anlovi had a commercial general liability policy with Castlepoint Insurance Company. Consistent with Insurance Law ? 3420, the policy contained a notice provision requiring notice ?as soon as practicable,? and allowed notice by a third party ?on behalf of the injured person.?
The underlying claim involved the tenants allegedly being burned by hot water in late 2008, and early 2009. Apparently, the building manager and building superintendent for Anlovi were both notified of the incidents on January 24, 2009. A letter dated January 27, 2009, was then sent by regular and certified mail to Anlovi by an attorney on behalf of the tenants. The letter advised Anlovi to forward the letter to its liability carrier.
A lawsuit was filed on February 23, 2009, and process was served on Anlovi through the Secretary of State on March 10, 2009. Apparently, they also attempted to notify Anlovi by regular mail. By letter dated April 7, 2009, the attorney for the tenants again notified Anlovi by mail of the pending lawsuit. His letter stated that he had not heard from its insurance carrier. On April 17, 2009, the attorney for the tenants moved for a default judgment against Anlovi. By letter of the same date, he notified Anlovi of the motion. By letter dated June 9, 2009, the attorney for the tenants forwarded a copy of the decision addressing the motion for default judgment to Anlovi. The letter stated that he still had not heard from their liability insurance carrier and would be forced to move again for default judgment if they did not respond.
Apparently, the building manager received notice on August 28, 2009, of an Order to Show cause seeking to attach Anlovi?s bank account. The Order to Show cause somehow led the tenants? attorney to learn, around October 2, 2009, that Castlepoint insured Anlovi. On that date, the attorney notified Castlepoint of the claims. Castlepoint then investigated the claims and promptly denied coverage on November 9, 2009.
On March 11, 2010, Castlepoint filed a declaratory judgment action against Anlovi to uphold the disclaimer of coverage. As Anlovi never gave notice to Castlepoint, the only issue to be decided was whether the tenants? attorney acted diligently in attempting to ascertain the identity of Castlepoint. The trial court found that the attorney for the tenants did nothing to attempt to ascertain the identity of the insurer and accordingly, upheld the disclaimer of coverage. The court noted that there is no indication that he directed his clients to ask around the building to see if anyone had any prior claims and knew the identity of the insurer. There was also no indication that he attempted to obtain any insurance information from the building superintendent or building manager. The court found that simply asking Anlovi to forward the correspondence to its insurance company was insufficient. The court stated that for the eight month period from January through late September, the attorney ?did nothing.? The court finally noted ?some effort might create an issue of fact; no effort presents an issue of law.?