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

A recent decision issued from a Brooklyn trial court serves as a reminder that those New York insurance policyholders who communicate information to an insurance agent, relying on the agent to forward it to the insurance company, will, at the end of the day, be left holding the bag if the agent is negligent.

The context in which this arose, in the case of Orange Grill Restaurant Corp. v. United States Liability Insurance Company, was that a nightclub patron was injured while dancing with a group of friends at Orange Grill, a restaurant. An ambulance was summoned and the injured patron was taken to the hospital. The restaurant was aware of the accident, but failed to notify its insurance company about the incident. It did, however, contact its agent by phone the next day to notify the agent of the accident.

Orange Grill claimed, however, that it had a reasonable belief of non-liability because its understanding of the cause of the accident was that the patron’s friend jumped up and landed on his ankle.

When the patron filed a lawsuit against the restaurant, claiming that the accident occurred because he fell on the dance floor because of slipping hazards present,  the restaurant forwarded the summons and complaint to its agent. Guess what the agent did? Absolutely nothing. So it was only after the patron’s attorney sent notice to the restaurant that he was about to request a default judgment that the insurance company was made aware of the accident — approximately one year after it occurred.

This delay is significant because the accident occurred prior to January 2009, when a change was made in the New York insurance laws. For years, insurance companies in New York could disclaim coverage if they received late notice from an insured about a potential claim. But in January 2009 the New York legislature enacted the much-needed change of requiring that insurers disclaiming coverage for late notice also have to prove that they suffered prejudice. Thus, if the subject policy had been issued after January 2009, there may have been no need for the restaurant to file a lawsuit asking the court to declare that the insurance company had to provide a defense and indemnification for the accident.

In any case, the court held that notice to the insurance broker was insufficient and that the insurance company was within its right to disclaim coverage. It further held that the restaurant did not have a reasonable belief of non-liability in light of the fact that it did notify the agent immediately after the accident and that undue emphasis should not be placed on the subjective belief of insured’s who are not trained in discerning liability.

The unfortunate thing for the restaurant–and the injured plaintiff who was then left with a lawsuit against an uninsured defendant–is that it would have been covered if it had simply duplicated the communications it made to notify its agent of the accident by making them to the insurance company as well.

You can read more about New York and New Jersey insurance law pertaining to agents here and here at my website.

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