Late Notice of Claim Defense is Still Viable Where the Insurer Can Demonstrate Prejudice, Such as Closing an Insurer’s Ability to Access Evidence

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📖 Case Summary: Hartford Fire Ins. Co. v Hudson Excess Ins. Co.

New York’s Appellate Division, First Department addressed a common insurance coverage issue, i.e., timely notice of claim and timely notice of lawsuit.

In Hartford Fire Ins. Co. v Hudson Excess Ins. Co., Mayer Malbin Realty I, LLC sought additional insured coverage from Hudson Excess Insurance Company under an insurance policy issued to TS Group, a subcontractor working on a construction project.

The underlying claim concerned a TS Group employee who fell from a ladder while working at Mayer’s premises.

⚡️ What Happened:

The following is a notification timeline to Hudson about the underlying accident:

•  September 20, 2017: Accident occurs.
• October 2017: Chen initiates a lawsuit against Mayer.
• October 2017: Mayer learns about the potential coverage through Hudson.
• March 2018: Mayer files third-party claims against TS Group.
• May 2020: Mayer provides notice to Hudson, over two years after discovering potential coverage.
• May 2020: Hudson disclaimed coverage “at this time,” because Mayer was not an additional insured and due to the late notice, which Hudson claimed was a material breach of the policy.

📝 Court’s Ruling:

• The Court concluded that Mayer’s notice was late, constituting a material breach of the policy. The important factor for the Court’s reasoning was that Mayer gave notice after the note of issue, closing Hudson’s ability to access evidence concerning the construction accident.
• Based on the foregoing, the Court reversed the motion court’s decision, holding that Hudson was not required to defend and indemnify Mayer based on untimely notice of the underlying claim.
• The decision concerns Insurance Law § 3420(c) (2) (A) (ii), which addresses, among other things, an insured’s burden to demonstrate the insurer was not prejudiced by the delay of a notice of claim given more than two years after it was reasonably possible to do.

✅ Key Legal Takeaways:

🔹 Timely Notice is Crucial: Always provide notice as soon as practicable. Delays can severely jeopardize coverage.

🔹 Document Thoroughly: Maintain comprehensive documentation of communications and steps taken after learning of a claim.

🔹 Proactively Investigate: Early involvement and proactive claims management help preserve vital evidence and witness recollection.

📢 Final Word:

This decision reminds me of the cases the New York Court of Appeals addressed in the early 2000s, where the late notice of claim and lawsuit provisions were chipped away, e.g. Rekemeyer v State Farm Mutual Automobile Ins. Company.

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