| Key Takeaways: • In New York, insurers have an extremely short window to disclaim coverage once on notice of a claim and few exceptions apply. • If an insurer fails to timely disclaim, coverage will be required. • Insurers can protect themselves by: (i) putting provisions in insurance policies requiring claimants to make a claim in the manner most likely to be quickly seen and reviewed by insurer, such as through an online portal; (ii) responding to the claimant immediately with at least a request for additional information; (iii) creating a record of investigation into the claim; and (iv) copying all known additional insureds or parties to a lawsuit and including language stating that the disclaimer applies to anyone making a claim under the insurance policy. |
New York courts have construed 3420 to require disclaimer in as a little as 30 days from receipt of initial notice of a claim, whether it be a letter from a claimant or a lawsuit.[3] Though New York courts have said “30 days or less” is not a “bright line rule,” and a disclaimer could be untimely if less than 30 days or timely if over 30 days, insurance carriers will often not have the facts to justify a longer disclaimer because the “basis for denying coverage was or should have been readily apparent before the onset of the delay.”[4]
Practically speaking, claimants often send in claims via mail and it may not be reviewed by the insurer for days or even weeks. This is particularly problematic for out-of-state insurers whose insurance policies list notice to be sent to an out-of-state location. While not full-proof, insurers could provide, and some do, that claims be made in a particular manner, such as online portal. This not only expedites review, but provides clear proof of date of receipt.
If, after receipt of a claim, the insurer responds with a request for more information, rather than a disclaimer, the insurer must thereafter create a factual record of actual investigation into the claim. Disclaimers are often (almost always) held untimely under 3420 if the insurer cannot show an actual investigation occurred after the initial request for more information, which is more than just letter-writing with the claimant. If the claimant fails to provide adequate information, the claim should be disclaimed sooner than later.[5] An insurer’s “claim notes” will often be key proof on actual investigation.[6]
Additional insureds (or additional claimants) present even bigger problems under 3420. First, because the basis of disclaimer to an additional insured is almost always the same as disclaimer to the insured, New York courts have rejected disclaimers to the additional insured that were as short as 7 days from receipt.[7] Second, while insurers often copy all additional insureds or parties to a lawsuit on a disclaimer, that will not, by itself, constitute a valid disclaimer to the additional insureds unless there is language making clear the disclaimer applies to them.[8]
Footnotes:
[1] See e.g. Reliance Ins. Co. v. Armstrong World Indus., Inc., 292 N.J. Super. 365, 375 (NY App. Div. 1st Dept. 1996).
[2] 3420 only applies to untimely disclaimers based on an exclusion. If the disclaimer is based on whether coverage initially exists, such as whether a claimant is an additional insured, 3420 does not apply. State Farm Mut. Auto. Ins. Co. v. Premium Laundry Corp., 228 A.D.3d 898, 900 (NY App. Div. 2nd Dept. 20024). While this distinction can often be hard to conceptualize, it is fairly easily understood as “but for” an exclusion” the “policy would apply to the claim.” Id.
[3] See Matter of Allstate Ins. v. Cruz, 30 A.D.3D 511, 512 (NY App. Div. 2d Dept. 2006); West 16th Tenants Corp. v. Pub. Serv. Mut. Ins., 290 A.D.2d 278 (NY App. Div. 1st Dept. 2002).
[4] Matter of All State Ins., supra.
[5] See e.g. Schulman v. Indian Harbor Ins. Co., 40 A.D.3d 957, 958 (NY App. Div. 2nd Dept. 2007).
[6] Axiomatically, a claimant’s delayed notice to the insurer will not often excuse delayed disclaimer where the insurer otherwise knew of the circumstances for disclaimer. Id.
[7] ADD Plumbing, Inc. v. Burlington Ins. Co., 192 A.D.3d 496, 497 (NY App. Div. 1st Dept. 2021).
[8] Valiant Ins. Co. v. Utica First Ins. Co., 185 A.D.3d 435, 436 (NY App. Div. 1st Dept. 2022).
