A New York and New Jersey Lawyer Who Represents Policyholders and Beneficiaries in Life Insurance Denial Cases

I apologize for being a little late out of the starting gate on this one, but here goes …

In January 2012, the First Department, Appellate Division, did something rather significant in the field of New York insurance law by overruling a decision from eight years earlier in 2004, DiGuglielmo v. Travelers Prop. Cas. (6 AD3d 344 [2004]).

That decision did not require an insurance company to disclaim based on lack of timeliness until it had investigated other possible reasons for disclaimer. The insurer could sit back holding its cards and wait until it had dotted all of its i’s and crossed its t’s to issue a disclaimer letter.

But not so anymore.

In the 2012 decision, George Campbell Painting v. National Union Fire Ins. Co. of Pittsburgh, the court aligned itself with its sister, the Second Department, to hold that Insurance Law section 3420(d) “precludes an insurer from delaying issuance of a disclaimer on a ground that the insurer knows to be valid – here, late notice of the claim – while investigating other possible grounds for disclaiming.”

In the case, the insurer, which issued a disclaimer for late notice on May 17, 2006, was aware of this particular defense four months earlier. Its inaction over that time period rendered the disclaimer ineffective as a matter of law. New York courts have routinely decided that an insurance company must issue a disclaimer within approximately 30 days after the grounds become known to it.

The 2012 decision has a profound impact on how insurers must address denials of coverage based on insured’s providing a late notice of the claim or incident. It also wipes away the hypocrisy of an insurance company denying coverage to its insured because of late notice–potentially resulting in financial ruin tot he insured — yet itself dawdle in issuing a disclaimer letter on those grounds.

The decision also makes clear that this principle applies to all reasons for a disclaimer. In other words, if the insurance company knows of any valid reason to disclaim coverage, late notice or other, it should do so immediately.

As for its rationale, the court found that the DiGuglielmo rule was inconsistent with the language of Insurance Law section 3420(d) which states that a disclaimer must be made “as soon as is reasonably possible.” Further, it observed that as a policy matter, if the insurance company is going to step away from providing coverage, it should do so as soon as possible so that the insured can pursue other avenues to protect him or herself.

This was a good decision for New York insurance policyholders.

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