Late Report of Loss Fatal to Claim to Excess Insurer

No Sufficient Excuse for Late Report

Every third party liability insurance policy contains a requirement that the insured report a loss, suit, or potential loss promptly as a condition precedent to suit. New York courts take that condition seriously and will enforce it unless there is a legitimate excuse for not reporting the loss promptly.

In Daimler Chrysler Insurance Company v. Elliot Keller, et al, RLI Insurance Company, 2016-01154, 2018 NY Slip Op 05999, Supreme Court Of The State Of New York Appellate Division, Second Judicial Department (September 12, 2018 ) a subrogation action to recover insurance benefits, the plaintiff appeals from an order that granted the motion of the defendant RLI Insurance Company for summary judgment dismissing the complaint.


On June 26, 2002, Elliot Keller was involved in a motor vehicle accident with Ojie Ferguson. At the time of the accident, Elliot was driving a vehicle he and Susan Keller (hereinafter together the Kellers) had leased from Chrysler Financial Company (hereinafter CFC). The Kellers were insured under a primary policy with Travelers Insurance Company (hereinafter Travelers), and Elliot had an umbrella policy with RLI Insurance Company (hereinafter RLI).

In 2003, Ferguson commenced an action against the Kellers and CFC. The Kellers first notified RLI of the accident and the lawsuit in August 2006, four years after the loss and three years after the suit was filed. RLI issued a disclaimer letter on September 5, 2006, denying coverage to all defendants for “late notice of suit.”

The Ferguson action was settled in 2007, with Daimler Chrysler Insurance Company (hereinafter DCIC) paying $250,000 toward the settlement on behalf of its insured, CFC, and Travelers paying $250,000. Thereafter, DCIC commenced this action, as subrogee of CFC, against the Kellers, and subsequently moved, inter alia, to amend the complaint to add RLI as a defendant.

After RLI was added as a defendant, it moved for summary judgment dismissing the complaint insofar as asserted against it based on CFC’s failure to provide timely notice of the occurrence, claim, and underlying suit. The Supreme Court (trial court) granted RLI’s motion on the basis that CFC did not qualify as an insured under the RLI policy, a ground not raised by either party, and denied DCIC’s cross motion.


The appellate court concluded that the trial court erred in essentially searching the record and granting relief based upon arguments that were not raised. Contrary to the court’s determination, in its motion, RLI did not assert that CFC was not an additional insured, but rather asserted that, even assuming CFC could prove it qualified as an insured under the policy, it failed to satisfy the notice requirements of the policy.

Rather than sending the case back to the trial court to rule on the issue presented the appellate court decided the issue itself since the issues were totally briefed in the trial and appellate court. It concluded that RLI established, prima facie, its entitlement to judgment as a matter of law dismissing the complaint insofar as asserted against it based upon CFC’s failure to provide timely notice of the occurrence and suit.

The appellate court also concluded that the insured’s failure to satisfy the notice requirement constitutes a failure to comply with a condition precedent which, as a matter of law, vitiates the. In support of its motion, RLI submitted evidence that counsel for the Kellers and CFC in the underlying action performed an investigation and learned the detailed information regarding the umbrella policy in March 2005. Such knowledge is imputed to the plaintiff. As such, RLI established that RLI was given no notice of the accident or lawsuit until August 2006, and CFC did not provide notice until RLI was served with DCIC’s motion to amend the complaint in June 2010.

Contrary to DCIC’s contention, RLI did not waive its right to deny coverage to CFC based on its disclaimer letter dated September 5, 2006, since that disclaimer denied coverage based on late notice of suit of all the defendants, not just the named insureds.

Accordingly, the appellate court agreed with the Supreme Court’s determination granting RLI’s motion for summary judgment, albeit for reasons different from those stated by the court.


New York law should be emulated across the country – especially when the facts are as egregious as this case: three to six years – since the notice requirements are conditions precedent to the right to defense or indemnity. With the facts in this case, even in a state that applies the “notice/prejudice” rule a court would find it impossible to conclude that the excess insurer was not prejudiced.


© 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 and

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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