If your business is insured under a New York general liability policy, it is imperative you provide your insurance carrier with notice of any possible claim by certified mail or some other verifiable communication as soon as practicable.  Under New York law, an insured’s failure to provide a timely notice of claim relieves an insurance carrier of its obligations to provide coverage and a defense, irrespective whether the insurer has been prejudiced by the delay.  New York Courts have found a notice of claim can be untimely even if it is served in as short a period as 45 days after the insured learns of the accident or other event triggering coverage.

A business must also provide the notice of claim directly to its insurance carrier. New York Courts have held even if an insurance carrier obtains independent knowledge of an insured’s loss (e.g., through the submission of a claim by another insured) this will not relieve the insured of its independent obligation to provide a notice of claim.  The Appellate Division’s decision in the 1989 case of  Heydt Contr. Corp. v. Am. Home Assurance Corp. involved one of the more famous, or infamous, applications of this rule. 

The dispute in Heydt originated out of a high-profile fire at a construction site at 7 World Trade Center, New York City, New York that caused more than $1 million in damages.  The general contractor initially did not file a notice of claim with its insurance company because of its mistaken belief it was covered under the building owner’s policy and/or contractual indemnification agreements.  After four months, the general contractor realized its error and filed a notice of claim under its own policy.  The insurance company disclaimed coverage on late notice grounds.  The general contractor then sued and alleged the insurance company wrongfully denied coverage.  The insurance company moved for summary judgment, dismissing the complaint on the grounds of late notice.

The Appellate Division, in reversing the decision of the trial court, held the insurer’s motion should have been granted and dismissed the contractor’s complaint.  Specifically, the Court found the contractor’s failure to provide a timely notice of claim was not excused or rendered moot merely because the insurer had independent knowledge of the underlying occurrence through news reports and other claims.  In addition, the contractor’s mistaken belief regarding coverage under a separate policy did not excuse its failure to provide timely notice to its insurer.

Although there has been a growing movement to adopt the rule of most jurisdictions, which precludes insurers from disclaiming coverage unless it can demonstrate prejudice (the “No Prejudice Rule”), the highest court in the State of New York issued two decisions in 2005 establishing it has no interest in adopting the majority rule.  In addition, for the past two years, the Legislature has failed to pass legislation adopting the No Prejudice Rule.

The only positive aspect of the reasoning underlying the Court of Appeals’ decisions regarding notice is that “the door swings both ways.”  The New York Court of Appeals has held if an insurance carrier fails to disclaim coverage within a reasonable period of time (as short as 45 to 60 days) after the carrier first learns of the accident or grounds for the denial of liability, the insurer can be barred from disclaiming coverage even if it ordinarily had a right to deny the claim.

Based on the foregoing decisions, it is critical that New York insureds provide immediate written notice directly to their insurer – and not rely upon a broker – when learning of a potential claim.  Similarly, if there is any question concerning whether there may be coverage under more than one insurance policy, it is critical to err on the side of caution and provide separate notices of claim to all insurers that may be obligated to indemnify and defend.