Here, in Of Interest, we often stress the need to issue timely disclaimers.  But what happens if your insured gives you the “run around”?  Do you need to fire off an immediate disclaimer?  New York’s top court grappled with this question in Country-Wide Insurance Co. v. Preferred Trucking Services Corp.

The Court of Appeals held that while an insurer makes diligent and good faith efforts to obtain its insured’s cooperation, it need not assume the worst.  A duty to disclaim does not arise until it becomes clear that the insured will not cooperate — which is a case-specific inquiry.

Preferred Trucking and Carlos Arias were insureds under a business auto policy issued by Country-Wide.  After sustaining injuries when unloading a vehicle owned by Preferred Trucking and operated by Arias, a worker commenced a lawsuit against them and others.

Upon receiving formal notice of the lawsuit in October 2007, Country-Wide published a reservation of rights letter to the insureds.  Country-Wide made repeated attempts to obtain the cooperation of the insureds.  In October 2008, Arias agreed to submit to a deposition but later refused to appear or even reschedule his deposition.  After the trial court struck the insureds’ answer, Country-Wide disclaimed coverage for failure to cooperate.

The Appellate Division ruled against Country-Wide ruling that Country-Wide’s disclaimer “was untimely, since it came approximately four months after it learned of the ground for the disclaimer.”

In reversing the Court of Appeals began by noting that the timeliness of a disclaimer of coverage is determined on a case-by-case basis.  Whether a disclaimer is merited for non-cooperation is “often not readily apparent.”  As the operator of the vehicle, Arias was obviously the key witness for Preferred Trucking. As the Court found, Arias “had personal knowledge of the accident and was in a position to provide a meaningful defense, or, alternatively, testify in such a way as to bind Preferred Trucking.”

The Court of Appeals agreed with Country-Wide’s argument that it could not know for certain that Arias would not cooperate until he refused to appear for or reschedule his deposition in October 2008.  Therefore, Country-Wide’s disclaimer was timely.

Thanks to Steven Kaye for his contribution to this post.  For more information, please email Dennis Wade at .