Late Notice to Insurer Not Fatal to Claim Under New York Law, Federal Court Holds September 9, 2009

In an opinion that was published in today’s New York Law Journal, a Federal judge refused to hold as a matter of law that an insurance company’s disclaimer of coverage was proper – even though the insured did not report the underlying incident giving rise to the claim until over a year had passed.

In this particular case, the jacuzzi maintenance company, Northway Pool Service, Inc., did not notify their insurance company about an incident wherein one of their customers died while in the hot tub because based upon the police’s questioning regarding the incident, they did not believe that they had any liability for the accident. More specifically, they didn’t notify the insurance company until more than one year later, when they were served with a summons and complaint seeking damages for wrongful death.

Atlantic disclaimed coverage for the loss, citing Northway’s failure to timely notify them about the occurrence, and then  brought this lawsuit seeking a Court Order to confirm the propriety of their disclaimer. In denying the insurance company’s motion, however, the Court acknowledged that while an insured’s failure to timely notify its insurer of an occurrence will generally vitiate coverage, there is also an important exception to this rule: where a reasonable person standing in the insured’s shoes would believe that they had no liability; stated differently, where the insured is justified in believing that he would not be sued for this occurrence.

At the risk of redundancy (see, “Why It May Pay to Fight an Insurer’s Disclaimer of Coverage“), you should never assume that an insurer’s disclaimer of coverage, or refusal to honor your insurance contract is valid.

Jonathan Cooper is a New York Business Litigation and New York Commercial Litigation Lawyer with a focus on New York breach of contract and New York business fraud claims before the Nassau, Queens, Brooklyn, Bronx, Westchester and Suffolk County courts of New York State. For more information, feel free to contact his Long Island office at 516-791-5700.

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