Representing Insureds Since 1970

Late Declination of Claim Dooms Insurer

In a successful appeal handled by Weg & Myers, the Appellate Division First Department held that notice from an insured's liability carrier notifying another carrier who insured the same entity as an additional insured of a claim and tendering the defense to that carrier constituted good notice, requiring the liability carrier to disclaim in a timely manner pursuant to New York State Insurance Law §3420(d). Because Atlantic failed in this obligation, the Appellate Court reversed the Motion Court and granted the insured summary judgment. In Industry City Management, et. al., v. Atlantic Mutual Insurance Company, the First Department held that a March 2005 letter which was authored and sent by Industry City's own insurer's claims administrator on behalf of Industry City to Atlantic Mutual seeking defense and indemnification coverage for Industry City properly constituted notice. The Court further held that Atlantic Mutual's disclaimer of coverage which was based on late notice and was issued seven months after the March 2005 letter was untimely as a matter of law. Consequently, Atlantic Mutual was obligated to indemnify Industry City in connection with the settlement in the underlying personal injury action.

In connection with the settlement of an underlying personal injury action in which Industry City was named as a defendant, Atlantic Mutual had earlier refused to provide indemnification to Industry City pursuant to the terms and conditions of a policy of insurance which was issued by Atlantic Mutual and named Industry City as an additional insured. The Supreme Court, New York County, granted summary judgment to Atlantic Mutual holding that Industry City had failed to provide timely notice of the underlying occurrence to Atlantic Mutual. In so doing however, the Supreme Court failed to recognize that the March 2005 letter served as notice for the underlying action and was not merely a request for coverage between insurers. As a result, Atlantic Mutual was compelled to reimburse its insured the settlement amount of $250,000 paid by it plus pre-judgment interest pursuant to CPLR 5001.