The New York Appellate Division has confirmed that an insurer must immediately disclaim on late notice grounds even if it is in the midst of investigating whether other policy provisions apply. In AIU Ins. Co. v. Veras, the insurer prepared a disclaimer of coverage letter once it learned that the insured had failed to notify it of the claim in a timely manner. The insurer then waited 15 days to issue the disclaimer letter because it was continuing to investigate whether other policy provisions applied to bar coverage for the claim.
The insured argued in a declaratory judgment action that the insurer had waived its right to disclaim on late notice grounds because it had waited too long to issue the disclaimer letter. The court agreed and ruled that the carrier’s 15-day delay constituted a waiver because an insurer has to immediately deny coverage on late notice grounds. The court disregarded the insurer’s ongoing investigation. The court did not discuss the impact of its ruling on the “one disclaimer” rule which requires an insurer to rely on all grounds for disclaiming coverage in one letter.
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