Failure to Timely Raise a Late-Notice Defense to Coverage May Constitute a Waiver of the Defense

The First Department determined there existed a triable issue of fact whether the insurer of a gas plant operated by Long Island Light Company (LILCO) waived a late-notice-based disclaimer of coverage.  Under the common law, the failure to assert a known policy defense may constitute a waiver:

Waiver is the voluntary relinquishment of a known right and must be predicated upon knowledge of the facts upon which the existence of the right depends … . The failure to assert a known policy defense may constitute a waiver … . “Whether an insurer has waived the defense of late notice is ordinarily a question of fact, which is proved by evidence that the insurer intended to abandon that defense” … .

The evidence supports an inference that defendants knew of facts supporting a late notice defense long before disclaiming coverage in their answers. Long Is Light Co v American Re-Insurance Co, 2014 NY Slip Op 08363, 1st Dept 12-2-14