In a recent Third Department decision, Klersy Bldg. Corp. v Harleysville Worcester Ins. Co., 2007 NY Slip Op 00360, the Court concluded that, at the very least, there was an issue of fact as to whether the insured's delay in notifying the insurer of a claim was reasonable.
In Klersy, the employee of a sub-contractor fell and was injured while working on a project for which the plaintiff was the general contractor. Although the plaintiff's president was informed of the fall on the day of the accident, the plaintiff did not notify its insurer of the claim until 4 months later, when it was served with a Summons and Complaint. Shortly thereafter, the plaintiff's insurer denied coverage on the grounds that the plaintiff had failed to notify it of the occurrence "as soon as practicable." The plaintiff then commenced a declaratory judgement action seeking to compel its insurer to defend and indemnify it in the underlying lawsuit.
The Court began its analysis by stating the applicable law:
Where a policy of liability insurance requires that notice of an occurrence be given 'as soon as practicable,' such notice must be accorded the carrier within a reasonable period of time...Failure to comply with the notice requirement vitiates the contract of insurance and, under such circumstances, the insurer is not required to demonstrate actual prejudice from the delay in order to successfully disclaim coverage...However, omitting to provide timely notice may be excused in certain situations, such as where the insured has 'a good-faith belief of nonliability,' provided that belief is reasonable...Although the insured bears the burden of proving that there was a reasonable excuse for a delay, the question of such reasonableness is generally a question of fact for a jury...(Internal citations and quotations omitted).
The Court then considered the plaintiff's explanation for the delay. In support of its claim that the delay in notifying its insurer was reasonable, the plaintiff alleged that it:
(D)id not immediately contact defendant because Clegg was employed by Donato, Donato was supervising Clegg when the accident occurred, and Donato had provided plaintiff with proof of both liability and workers' compensation coverage prior to the construction project...(and) any potential claim would be covered by Donato's insurance...(D)uring the company's nearly 50 years in business, it had minimal experience with job site accidents that resulted in claims...
The Court concluded that the issue of reasonableness was for the jury to decide in light of the particular facts of this case and thus upheld the trial court's denial of the insurer's motion for summary judgment.
I think the Court made the correct decision in this case. But, I also think that the insured was awfully lucky. Having been in business for nearly 50 years, the plaintiff should have known to immediately notify its insurer of the fall, even if the company hadn't had much experience with claims. I've been involved in cases where the insured had far better excuses for a late notice of claim than the plaintiff had in this case and yet was unable to persuade the judge of the reasonableness of the excuse. After all, like beauty, reasonableness is in the eye of the beholder!