First Case on New NY Late-Notice Law Favors Insurer

The first case under the revised New York insurance law section that now requires an insurance company to show prejudice before it can deny coverage for late notice, has just been reported. It’s Atlantic Casualty Ins. Co. v. Value Waterproofing, Inc., No. 11 Civ. 7565 (DLC) (S.D.N.Y. Jan. 15, 2013).

In the February 4th issue of the Insurance Advocate I discussed a case that pre-dated the new law but, based on special wording in the policy, required the insurer to show prejudice in order to deny coverage for late notice. I wrote that we were still waiting for the first decision under the new law. Well now we have one. The court held in this case, as another court did in the case I wrote about, that the insurance company was prejudiced by the delay in reporting the claim and could, therefore, deny coverage.

This was hardly your run-of-the-mill trip and fall claim. It grew out of the collapse of a roof over a KFC on Lenox Avenue in Manhattan during the February 2010 snowstorm and a claim against the contractor who worked on the roof. The new law puts the burden of proving prejudice on the insurer if the loss report is first submitted less than two years after the occurrence. The Federal Court for the Southern District of New York, a well-respected court, felt that the insurer, Atlantic Casualty, met its burden to show prejudice. It did not accept the arguments that the late notice should be excused because the roof and second floor had been demolished within three weeks after the collapse by order of the NYC Building Department or that inspections by other firms and agencies were available.

The take-away for us is that New York courts may turn out to be relatively lenient in the standards imposed on insurers it comes to showing prejudice. The three most important steps in handling a liability claim remain as I’ve said: Report, Report, and Report.