- Liability Insurers With Grounds Must Timely Disclaim Coverage Even While Investigating Claim George Campbell Painting v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa.
- February 10, 2012 | Authors: David L. Cox; Antoinette L. Ellison; Carl A. Salisbury
- Law Firms: Kilpatrick Townsend & Stockton LLP - Washington Office ; Kilpatrick Townsend & Stockton LLP - Atlanta Office ; Kilpatrick Townsend & Stockton LLP - New York Office
The First Department of the New York Appellate Division has now overruled its own precedent and joined the Second Department in holding that a New York insurance statute requires a liability insurance company to inform New York policyholders as soon as it believes it has grounds for denying coverage, even if it is still investigating other possible grounds for a denial. George Campbell Painting v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 2012 WL 118461 (N.Y. App. Div. Jan. 17, 2012) (2012 N.Y. Slip Op. 00254) (“George Campbell Painting”). This decision is favorable for policyholders, because it harmonizes New York law on this issue and places the burden on insurers to communicate all coverage positions “as soon as reasonably possible.”
Under a New York insurance statute, N.Y. Ins. Law § 3420(d), a liability insurer is required to give a policyholder written notice of a denial of coverage of a personal injury claim “as soon as is reasonably possible.” The Second Department of the New York Appellate Division has long held that, under § 3420(d), a liability insurer must notify its insured of grounds to deny coverage, even if it is continuing to investigate other grounds to deny coverage. City of New York v. N. Ins. Co. of New York, 284 A.D.2d 291, 292 (N.Y. App. Div. 2001) (“City of New York”).
Until now, First Department caselaw had been in conflict with City of New York. In DiGuglielmo v. Travelers Property Casualty, 6 A.D.3d 344 (N.Y. App. Div. 2004)("DiGuglielmo"), the First Department held that, despite the statutory language of § 3420(d), an insurer is not required to tell a policyholder that its claims would be denied on timeliness grounds before conducting a prompt, reasonable investigation into other possible grounds for denial. That had been the law in the First Department since 2004, but the George Campbell Painting decision expressly overrules DiGuglielmo, stating: “Th[e] plain language [of § 3420(d)] cannot be reconciled with allowing the insurer to delay disclaiming on a ground fully known to it until it has completed its investigation (however diligently conducted) into different, independent grounds for rejecting the claim.”
This decision is likely to be most significant in the context that the case was decided - an insurer’s late notice defense on a liability claim that is not communicated in a timely manner. However, the decision is not limited to an insurer’s late notice defense, but instead requires the insurer to deny coverage if it is aware of any grounds to do so. This should allow New York policyholders to address any disputes with their insurers earlier, and make better decisions consistent with their insurers’ positions.