March 2004

DISCLAIMER OF INSURANCE COVERAGE MUST BE COMMUNICATED TO THE POLICYHOLDER IN WRITING AS SOON AS REASONABLY POSSIBLE.

The Court of Appeals has recently held that an insurer=s 48-day delay in notifying a policy holder of denial of coverage is unreasonable as a matter of law under Insurance Law '3420(d). First Financial Insurance Company v. Jetco Contracting Corp., 1 N.Y.3d 64, 769 N.Y.S.2d 459 (2003).

In First Financial, the insurer=s disclaimer of coverage, based on the timely notice exclusion, was made 48 days after receiving notice of the claim. The insurer attempted to excuse the late disclaimer by stating that it needed time to investigate whether the insured had additional insurance coverage. Since the insurer=s eventual disclaimer was based on receiving late notice from its insured, the question of whether additional insurance coverage may be available for the claim had no bearing on the question of late notice.

As Insurance Law '3420(d) states that a disclaimer must being made in writing Aas soon as is reasonably possible@, the Court of Appeals held that the circumstances of each case must be analyzed individually with no arbitrary and universal time limitation. However, after ascertaining the facts in First Financial and reviewing other cases involving delays, the Court of Appeals held that 48 days was unreasonable as a matter of law since the insurer=s excuse for the untimely disclaimer could not be a factor in the insurer=s ultimate decision to deny coverage.

Keeping in mind that the letter of disclaimer must include all bases for denial of coverage, there is a lesson to be learned from First Financial. After quickly ascertaining all bases for a viable disclaimer, it is crucial for the insurer to communicate the disclaimer to the policyholder as soon as possible.

NOTICE TO THE TENANT MAY BE IMPUTED TO THE LANDLORD.

In Wilson v. Livingston; 305 A.D.2d 585, 762 N.Y.S.2d 408 (2nd Dept., 2003); a mother and infant commenced an action against the defendant landlord to recover for personal injuries sustained as the result of being bitten by a tenant=s dog. It was undisputed that the tenant had prior knowledge of the dog=s vicious propensities, as, on a prior occasion, the dog in question attacked the tenant=s daughter.

The question in this case was whether the landlord knew or should have known of the dog=s vicious propensities. This issue turned on the fact that the tenant maintained the landlord=s property in exchange for a reduced rent. As such, it was held that the tenant was an agent of the landlord. The Court held that the tenant=s knowledge of vicious propensities was therefore imputed to the landlord through the notion of agency. Accordingly, the landlord was vicariously liable for the tenant=s negligence.

Thomas P. Kawalec