The Third Department, reversing Supreme Court, determined defendant insurer properly disclaimed coverage because the insured, plaintiff general contractor, did not timely notify the insurer of a lawsuit brought by an injured construction worker. Plaintiff was not notified of the suit because it had not appointed a new registered agent for service to replace a defunct agent (not an adequate excuse). The court noted that the “no prejudice” rule applied to the disclaimer, meaning that the insured need not show it was prejudiced by the lack of notice to disclaim:
The liability insurance policy at issue here “contain[s] clauses requiring [plaintiff] to provide prompt notice of [both] an occurrence implicating coverage” and any ensuing legal action … . “The insurer’s receipt of such notice is therefore a condition precedent to its liability under the policy,” and a failure to give that notice “may allow an insurer to disclaim its duty to provide coverage” … . At the time the policy here was issued, “[n]o showing of prejudice [was] required” to justify a disclaimer … . The absence of a need to demonstrate prejudice represented “a limited exception to th[e] general rule,” and was justified by a primary “insurer’s need to protect itself from fraud by investigating claims soon after the underlying events; to set reserves; and to take an active, early role in settlement discussions” … .
There is no dispute that plaintiff provided timely notice of the underlying accident, but it is equally clear that plaintiff failed to “[n]otify [defendant] as soon as practicable” that the personal injury action had been commenced. Indeed, plaintiff never gave notice to defendant, although counsel for Speirs did so approximately four months after papers had been served … . That delay, “in the absence of an excuse or mitigating factors, is unreasonable as a matter of law” … . Plaintiff never gave notice because it did not receive the summons and complaint but, inasmuch as its nonreceipt flowed from its failure to appoint a new registered agent for service to replace a defunct one that had been named decades earlier, that explanation was “insufficient as a matter of law” … . Kraemer Bldg. Corp. v Scottsdale Ins. Co., 2016 NY Slip Op 01233, 3rd Dept 2-18-16
INSURANCE LAW (FAILURE TO NOTIFY INSURER OF UNDERLYING LAWSUIT ENTITLED INSURER TO DISCLAIM COVERAGE WITHOUT A SHOWING OF PREJUDICE)/DISCLAIMER (INSURANCE, FAILURE TO NOTIFY INSURER OF UNDERLYING LAWSUIT ENTITLED INSURER TO DISCLAIM COVERAGE WITHOUT A SHOWING OF PREJUDICE)