Impact Of Late Notice Of Claim To Liability Carrier (New York)

A severe recent federal court decision in New York state emphasized the importance of having your subrogation counsel identify and notify the insurer for potentially responsible parties of subrogation claims as soon as possible.

In 2008, the New York legislature amended Insurance Law § 3420 to require an insurer, in disclaiming liability coverage in which notice is given to the insurer within two years of an otherwise covered occurrence, to show that it was prejudiced by untimely notice. See An Act to Amend the Civil Practice Law and Rules and the Insurance Law, in Relation to Liability Insurance Policies § 8, 2008 N.Y. Sess. Laws 388 (McKinney 2008). Previously, New York courts had applied the "no-prejudice" rule under which an insurer had only to prove late notice and prejudice would be presumed. The amendment to the New York Insurance Law applies to insurance policies that were issued or delivered after January 17, 2009.

A New York federal court recently sided with an insurer fighting coverage for a roof collapse in its interpretation of this 2008 law. Atlantic Casualty Ins. Co. v. Value Contracting, Inc., 2013 U.S.Dist. LEXIS 6044 (SDNY 2013).

In this case, a landlord owned a commercial property at 685 Lenox Avenue in New York City. Shortly before February 26, 2010, the landlord hired a contractor, Value, to work on carpentry issues related to the roof at this property. A major snow storm in New York City occurred on February 25th and 26th, leaving approximately 20 inches of snow on the roof, resulting in a roof collapse. The landlord was aware of the collapse by February 27th and contacted Value's principal that same day to inform him of the collapse. One or two days later, the landlord called Value's principal again to request Value's certificate of insurance.

On March 1, Greenwich, the...