The big news regarding New York insurance law this past summer was that Governor Paterson signed a Bill eviscerating New York's long-standing no-prejudice rule (see Bill here: Download No-Prejudice.doc).

The New York Court of Appeals heard oral arguments in Sorbara Constr. Corp. v. AIU Ins. Co. yesterday regarding applying the no-prejudice rule where the insured failed to give timely notice to an excess insurer.  In Sorbara, the plaintiff became aware of its employee's accident and his ensuing lawsuit almost immediately, but did not notify defendant excess insurer for some 5½ years, until after the defendants in the underlying matter had instituted a third-party action against it.  The Appellate Division, First Department held that the insured's "protracted delay" relieved the insurer from defending or indemnifying the insured. 

Notably, the First Department held that notice under a workers' compensation policy (by the same insurer) does not constitute notice under a liability insurance policy.  The Court also noted that the plaintiff's own duty to provide notice to the excess insurer is not negated by the insurer's actual knowledge acquired from another source.

New York Civil Law will keep you apprised when the decision is handed down.