Argo Corp. v. Greater NY Ins.
| Decision Date | 05 April 2005 |
| Citation | 4 N.Y.3d 332,827 N.E.2d 762,794 N.Y.S.2d 704 |
| Parties | THE ARGO CORPORATION et al., Appellants, v. GREATER NEW YORK MUTUAL INSURANCE COMPANY, Respondent. |
| Court | New York Court of Appeals Court of Appeals |
Nicoletti Hornig Campise Sweeney & Paige, New York City (David R. Hornig and Julia M. Moore of counsel), for appellants.
Thomas D. Hughes, New York City, and Richard C. Rubinstein for respondent.
Anderson Kill & Olick, P.C., New York City (John B. Berringer and Dennis J. Artese of counsel), for Catholic Health Services of Long Island, amicus curiae. Hiscock & Barclay, LLP, Albany (Mark W. Blanchfield of counsel), for New York Insurance Association, Inc., amicus curiae.
Rivkin Radler LLP, Uniondale (Evan H. Krinick and Alan C. Eagle of counsel), and Wiley Rein & Fielding LLP, Washington, D.C. (Laura A. Foggan and John C. Yang of counsel), for Complex Insurance Claims Litigation Association, amicus curiae. Dickstein Shapiro Morin & Oshinsky LLP, New York City (David L. Elkind, Edward Tessler and Elizabeth A. Sherwin of counsel), for KeySpan Corporation, amicus curiae.
Athari Law Office, Utica (Mo Athari of counsel), for Athari Law Office, amicus curiae.
Kirkpatrick & Lockhart Nicholson Graham LLP, New York City (Gerald A. Novack of counsel), Val Washington, Kirkpatrick & Lockhart Nicholson, Graham LLP, Pittsburgh, Pennsylvania (Thomas E. Birsic and Paul K. Stockman of counsel), and Edgar Snyder & Associates, LLC, Pittsburgh, Pennsylvania (James D. Belliveau and Michael H. Rosenzweig of counsel), for Crucible Materials Corporation and others, amici curiae.
The issue in this case is whether a primary insurer can disclaim coverage based solely upon a late notice of lawsuit or must show prejudice. We hold that, under the circumstances of this case, plaintiffs' late notice was unreasonable as a matter of law, that the Appellate Division correctly applied Matter of Brandon (Nationwide Mut. Ins. Co.) (97 NY2d 491 [2002]) and that the insurer need not show prejudice.
On January 2, 1997, Igo Maidanek slipped and fell on ice on the sidewalk adjacent to 137-01 83rd Avenue in Kew Gardens, New York. Maidanek was a tenant of the premises. The property was owned by Henry Moskowitz and managed by two companies owned by Moskowitz, Argo Corporation and Martinique Realty Associates (Argo).
On December 27, 1999, Maidanek brought suit for personal injuries against Argo by serving a summons and complaint on the New York Secretary of State. Argo acknowledged receipt of the summons and complaint by signing a return-receipt dated February 28, 2000. On November 10, 2000, Argo was served with a default judgment. On February 13, 2001, Argo received a notice of entry of the default judgment and of the scheduling of a hearing on that judgment. On February 21, 2001, Argo received service of a note of issue for trial readiness.
Argo notified Greater New York Mutual Insurance Company (GNY), its commercial liability insurance carrier,1 on May 2, 2001. On June 4, 2001, GNY disclaimed coverage because of the late notice of the lawsuit and occurrence, which, according to GNY, was a "condition precedent" to coverage under the insurance policy.2
As a result, Supreme Court granted defendant's motion to dismiss for failure to timely notify the insurer.
The Appellate Division affirmed, stating:
We granted leave to appeal and now affirm. For years the rule in New York has been that where a contract of primary insurance requires notice "as soon as practicable" after an occurrence, the absence of timely notice of an occurrence is a failure to comply with a condition precedent which, as a matter of law, vitiates the contract (see Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436, 440-443 [1972]
) [failure to notify in a timely manner allowed insurer to disclaim coverage]). No showing of prejudice is required (id.). Strict compliance with the contract protects the carrier against fraud or collusion (id.); gives the carrier an opportunity to investigate claims while evidence is fresh; allows the carrier to make an early estimate of potential exposure and establish adequate reserves and gives the carrier an opportunity to exercise early control of claims, which aids settlement (Unigard Sec. Ins. Co. v North Riv. Ins. Co., 79 NY2d 576, 582 [1992]).
We have applied the no-prejudice rule in various contexts in recent years: supplementary underinsured motorist (SUM) insurance (Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso, 93 NY2d 487, 495-496 [1999]
; cf. Matter of Brandon, and Rekemeyer v State Farm Mut. Auto. Ins. Co., 4 NY3d 468 [2005]) and excess insurance (American Home Assur. Co. v International Ins. Co., 90 NY2d 433, 442-443 [1997]). We have held, however, that the rule enunciated in Security Mutual does not apply to reinsurance and a reinsurer must show prejudice before it can be relieved of its obligations to perform under a contract (Unigard Sec. Ins. Co. v North Riv. Ins. Co., 79 NY2d 576, 582-584 [1992]).
In Matter of Brandon (Nationwide Mut. Ins. Co.) (97 NY2d 491 [2002]), we again departed from the general no-prejudice rule and held that the carrier must show prejudice before disclaiming based on late notice of a lawsuit in the SUM context (see 97 NY2d 491, 498 [2002], supra). Under the facts of Brandon, the carrier received timely notice of claim but late notice of a lawsuit (see id. at 494-495). We were unwilling to extend the no-prejudice exception in regard to late notice of a lawsuit because "unlike most notices of claim—which must be submitted promptly after the accident, while an insurer's investigation has the greatest potential to curb fraud—notices of legal action become due at a moment that cannot be fixed relative to any other key event, such as the injury, the discovery of the tortfeasor's insurance limits or the resolution of the underlying tort claim" (see id. at 498).
Brandon did not abrogate the no-prejudice rule and should not be extended to cases where the carrier received unreasonably late notice of a claim. The facts here, where no notice of claim was filed and the first notice filed was a notice of lawsuit, are distinguishable from Brandon where a timely notice of claim was filed, followed by a late notice of lawsuit, and distinguishable from Rekemeyer, where an insured gave timely notice of the accident, but late notice of a SUM claim. Argo was notified of the lawsuit against it in February 2000 but did not notify GNY until May 2001. The burden of establishing that the delay was not unreasonable falls on the insured (see U.S. Underwriters Ins. Co. v A & D Maja Constr., Inc., 160 F Supp 2d 565, 569
[SD NY 2001]).
Argo admits that Maidanek filed the lawsuit against it in late 1999, and that it received notice of the claim in early 20...
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