Notice to Excess Not Required Until Insured Knows the Claim Will Exhaust the Primary Insurance
Liberty Mutual Fire Insurance Company, as subrogee of Edison Properties, LLC, et al. v. Navigators Insurance Company, 2018 NY Slip Op 00631, 5602 653341/13, Appellate Division of the Supreme Court of the State of New York (February 1, 2018)
The Supreme Court (trial court), New York County (Ellen M. Coin, J.), entered on or about March 20, 2017, denied the motion of defendant Navigators Insurance Company (Navigators) for summary judgment dismissing the complaint, and granted the motion of plaintiff Liberty Mutual Fire Insurance Company (Liberty Mutual) as subrogee of Edison Properties, LLC, Edison Construction Management, LLC and 5030 Broadway Properties, LLC for summary judgment awarding Liberty Mutual the amount of $850,000, plus statutory interest and costs as against Navigators.
An insurer’s duty to cover the losses of its insured “is not triggered unless the insured gives timely notice of loss in accordance with the terms of the insurance contract” (Travelers Ins. Co. v Volmar Constr. Co., 300 AD2d 40, 42 [1st Dept 2002] [internal quotation marks omitted]).
Even if the insurance policy were construed as specifying that only the named insured was required to provide notice of occurrences, demands and suits to the insurer, the duty to give reasonable notice as a condition of recovery is implied in all insurance contracts and is applicable to an additional insured. Where notice to an excess carrier is at issue, the focus is on whether the insured reasonably should have known that the claim against it would likely exhaust its primary insurance coverage and trigger its excess coverage, and whether any delay between acquiring that knowledge and giving notice to the excess carrier was reasonable under the circumstances.
The appellate court found that Liberty Mutual’s November 17, 2010 letter was sufficient to provide notice of claim to Navigators. However, even if the June 2010 supplemental bill of particulars implicated Navigators’ excess policy and the notice was untimely, Navigators’ disclaimer, issued 37 days later, was untimely as a matter of law.
The New York appellate courts have an uncanny ability to take a difficult issue and, in a clear and concise opinion, dispose of the problem. Notice of claim defenses are clearly difficult for both sides and this one made it clear that notice to an excess insurer is only required when the primary insurer and the insured learn there is a potential to impinge on the excess insurer’s limits.
© 2018 – Barry Zalma
This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and firstname.lastname@example.org.
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