New York’s Insurance Law was amended in 2009 to require insurers who seek to deny claims by reason of late notice to establish prejudice. In Indian Harbor Insurance Co. v. The City of San Diego, the United States Court of Appeals for the Second Circuit upheld the district court’s decision that the common law no prejudice rule, and not the provisions of N.Y. Ins. Law § 3420(a)(5) applied because the policy had not been “issued or delivered” in New York as required by the statute.

The pollution and remediation liability policy issued to the City of San Diego contained a New York choice of law provision and required the City to notify Indian Harbor ʺas soon as practicableʺ about any liability claims relating to ʺpollution conditions.ʺ  Although the president of Indian Harbor — who “signed” the policy — had his office in New York, the signature was a pre‐existing electronic signature and affixed to the policy in Exton, Pennsylvania. The policy was created and mailed to California from the Pennsylvania office and all transmittal paperwork bore the Pennsylvania office’s letterhead. Thus, because the Policy was not ʺissued or deliveredʺ in New York, by its terms § 3420(a)(5) would not apply.

The City also argued that the amendment to §3420 created a new public policy changing the common‐law no‐prejudice rule. The Court rejected this argument, and stated that if the intent of the legislature had been to change the common law for all policies, it could have done so.  The Court pointed out that it had previously declined to apply § 3420 outside of the geographic scope dictated by the statutory language, and that numerous cases have continued to apply the common‐law no‐prejudice rule after § 3420(a)(5) came into effect on January 17, 2009, where the criteria under the statute had not been met.  The Court concluded that because there was no applicable statue here, the common-law no prejudice rule should apply.  Because notice was provided 58 days late, it was deemed untimely as a matter of law.

Thanks to Jorgelina Foglietta for her contribution to this post.   For more information, please write to Mike Bono.