We have frequently reminded clients of the importance of promptly notifying their insurers of any actual, threatened or possible claims against them. This has been especially important in New York because the New York Court of Appeals has held that an insurer may deny coverage due to late notification, regardless of whether the delay actually prejudiced the insurer. During its 231st session, the New York State Legislature attempted to overrule this case law through legislation. Under an amendment to Section 3420 of the New York Insurance Law, an insurer may now no longer deny a claim for untimely notice unless the delay “materially prejudices” the insurer. This change in the law does not mean, however, that boards or managing agents should be any less prompt in reporting claims in the future.
The new statutory provision has a number of traps for the unwary: (1) it applies only to insurance policies issued or delivered in New York after January 19, 2009; (2) it applies only to claims for bodily injury or property damage; (3) it does not apply to claims-made policies (policies which require that claims must be made within the policy period) and, most important, (4) it does not apply to directors and officers liability coverage.
When a condominium or cooperative becomes aware of an actual, potential or threatened claim, notifying the relevant insurer as promptly as possible remains the best practice. Most boards do this through their managing agent. If the notice goes to the building’s insurance broker, the board or the managing agent should also obtain confirmation that the broker has notified the actual insurer. If the broker fails to notify the insurer, the insurer may attempt to deny coverage of the condominium or cooperative even though notice went to the broker.
If you have any questions, please contact us.
This memorandum was initially issued by the cooperative/condominium practice group of Balber Pickard Maldonado & Van Der Tuin, PC which joined Smith, Gambrell & Russell, LLP on February 1, 2017 and now practices as part of SGR’s cooperative/condominium practice group.