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White and Williams Insurance Coverage Team Convinces New York’s Highest Court to Reject Policyholder’s Effort to Rewrite Law Regarding Timing of Coverage Disclaimers

June 10, 2014

On June 10, 2014, the New York Court of Appeals held in KeySpan Gas East Corp. v. Munich Reinsurance America, Inc., __ N.E.3d __, 2014 WL 2573382 (N.Y. June 10, 2014), that a lower court had erroneously imposed on insurers a duty to issue coverage disclaimers for property damage claims “as soon as reasonably possible” or risk waiving their coverage defenses.  White and Williams represents one of the insurers in the case, which is a dispute over coverage for environmental damage at former manufactured gas plant sites.  The Court of Appeals held that the New York Supreme Court, Appellate Division, mistakenly held that the insurers were required to assert their defenses of late notice “as soon as reasonably possible” after obtaining sufficient information to do so.  That standard was derived from New York Insurance Law § 3420(d), which is a statute that applies only to certain cases involving death or bodily injury claims.  Property damage claims, like those at issue in KeySpan, are subject to New York common law, which for over a century has defined waiver as “the intentional relinquishment of a known right.”  The Court of Appeals remanded the case and instructed the Appellate Division to determine whether the insurers – which expressly reserved their right to assert the late notice defense – “clearly manifested an intent to abandon” the defense.

This is a significant victory for insurers because the Court of Appeals rejected an unnecessarily stringent standard for timely disclaimers of coverage that is unsuited for complex property damage cases.  The decision also confirmed that, outside the specific body of claims governed by Insurance Law § 3420(d), insurers will not be held to have waived their coverage defenses merely through an alleged delay in disclaiming.  Waiver will not be found unless it is shown that the insurer clearly intended to relinquish its defenses.

Our client, the Northern Assurance Company of America, was represented by Robert Walsh with assistance from Paul Briganti.

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