Since revisions to New York’s Insurance Law §3420 to effect in 2009, insurance practitioners have been paying attention to how Courts interpret late notice of claims.  Specifically, insurers need to know what facts are sufficient to show prejudice to support a disclaimer based on late notice.  A recent decision establishes that the inquiry is not based upon what the insurer says it would have done if proper notice was received but the depth of investigation actually taken.

In Global Liberty Ins Co v McRae, the insurer received notice of a claim on August 29, 2012 regarding a “very questionable” motor vehicle accident which occurred August 9, 2011. The claim manager made three phone calls including one to the insured, which was a disconnected number, and immediately issued a disclaimer based on late notice and lack of cooperation.

The court was not convinced by the claim examiner’s testimony that if he had received timely notice, he would have conducted scene investigation, spoken to witnesses and reviewed surveillance footage of the accident.  The hasty disclaimer supported a finding that the insurer failed to make a reasonable effort to investigate the claim.

Since the underlying case was in suit when notice was received, the court’s opinion was based on the fact that the insurer failed to attempt to review discovery, obtain the police report or speak to witnesses before disclaiming. The court believed this type of investigation would allow the insurer to determine if any evidence had been lost or was unavailable due to the delay.

While the law contains a strict requirement that an insurer issue a disclaimer promptly, a tangible showing of a reasonable investigation when notice is received is also required.  Thanks to Jim Rogers for his contribution.  Please email Brian Gibbons with any questions.