When an insured seeks liability coverage under its general liability or commercial liability policy after it has been sued for personal injuries or death resulting from an accident, New York State Insurance Law § 3420(d) requires the insurance company to make its decision to disclaim liability or deny insurance benefits to the insured and provide “written notice as soon as is reasonably possible” to the insured and those persons making the claim. This obligation usually arises after the insured’s obligations under the applicable insurance policy have been triggered—one of which is the insured’s obligation to provide its insurance company with reasonable, timely notice of the claim in the first instance. So, if the insurance company doesn’t timely refuse to provide insurance coverage on the basis of late notice having been provided to it, that defense will be found to have been waived by the insurance company and unavailable to it in a subsequent suit seeking to force the insurer to provide coverage.
The New York State Court of Appeals recently reviewed these obligations in the context of a claim for coverage brought by a commercial business in connection with property damage suits against it based upon the alleged dumping of hazardous materials by the business, where the Insurance Law denial/disclaimer rules do not apply. The Court instead applied a common-law waiver and estoppel analysis and allowed the insurance company to assert the defense in the insured’s breach of contract action under the applicable insurance policies.
In Estee Lauder Inc. v. OneBeacon Ins. Group, LLC, 28 N.Y.3d 960 (2016), the highest Court in New York State found that the insurance company’s failure to assert an affirmative defense of late notice by the insured, after reviewing all factors, did not waive the defense to coverage in the subsequent suit brought by the insured. The Court found that the insurer in that case had raised late notice by the insured in “early communications” and that the “mere passage of time rather than . . . the insurer’s manifested intention to release a right . . . or on prejudice to the insured” was not a sufficient basis to find that the insurer was prevented from pointing to the insured’s late notice to avoid its coverage obligations.
Therefore, timely written notice of the late notice defense by the insurance company did not waive the potential complete defense to coverage. The insurance company was permitted to amend its Answer to include the defense, meaning, potentially, that the insured will not get the paid-for benefits of its insurance policy due to its late notice of the claim.
The lesson to be taken from this decision is that you must review your insurance policies and know when you are required to provide notice to your insurance company in order to protect your rights in the event of a lawsuit against you. At CMM, we are available to assist you in such a review to help you make sure that you don’t lose your insurance coverage for this reason.