New York Insurance Law §3420(d)(2) requires that an insurer deny coverage as soon as reasonably possible.   The typical trigger for the statute to apply is for the claim to involve a personal injury.  But recently, an insurer presented a different defense, arguing that the statute was inapplicable because the injury did not involve an “accident.”

In Jewish Cmty. Ctr. of Staten Island v. Trumbull Ins. Co., the claimant alleged that he was abused by a community center’s employee who allegedly pulled down his pants and spanked him.  The insurer denied coverage to the community center pursuant to an exclusion that barred coverage for certain criminal acts.  However, the insurer did not issue the disclaimer until 105 days after receiving the claim.

The insured argued that the insurer waived its coverage defense  because a delay of 105 days under  §3420(d)(2) was not as soon as reasonably possible.  The insurer argued that the statute applied only to injuries that arise out of “accidents” and the criminal abuse of a minor was not an accident.

The court disagreed with the insurer and ruled that the community center was entitled to coverage.  In determining whether there was an “accident” under §3420(d)(2), the court looked to case law interpreting the policy definition of an “occurrence” or accident.  In that context, New York courts have held that an intentional act by the insured’s employee might still constitute an accident if, from the standpoint of the insured/employer, the incident was unexpected.  Here, the employee’s abuse was an  “accident” for purposes of an untimely disclaimer because, from the standpoint of the community center/employer, the employee’s abuse was unexpected.

Thanks to Mendel Simon for his contribution to this post.  If you would like more information please write to Mike Bono.