The question of when a carrier must disclaim coverage in New York for a bodily injury claim is a most litigated issue. New York Insurance Law 3420(d) requires a liability insurer to give the insured written notice of a disclaimer “as soon as is reasonably possible.” However, New York also has a “one disclaimer” rule, which requires a carrier to list all grounds for disclaiming coverage in the disclaimer or it will waive any other basis that may be available. The Appellate Division, First Department recently reversed its prior rule and held that a carrier must disclaim when it first learns of a late notice basis for disclaiming coverage, even it the carrier is investigating other possible reasons that coverage may not be afforded.
In George Campbell Painting v. National Union Fire Ins. Co. (116389/08) it was not in dispute that notice of the loss was untimely, and that the carrier was aware of the late notice when it first received notice of the loss from a purported additional insured. The carrier, however, investigated whether the entity giving notice of the loss was actually an additional insured. The Appellate Division held that the disclaimer based on late notice, issued four months after the carrier received notice, was untimely, despite the ongoing investigation that was being conducted by the carrier.
How this duty-to-disclaim-immediately rule can be reconciled with the single disclaimer rule was left unanswered by the court. No doubt additional appellate litigation on the subject will ensue!