Insurers using untimely notice as reason for denying a claim must notify the insured of that belief in writing as soon as reasonably possible, or else the insurer waives the right to that defense, according to a recent New York court decision.
In the case before the New York Supreme Court, Appellate Division, First Department–Estee Lauder Inc. v. OneBeacon Insurance Group, LLC, etc., et al.–OneBeacon rejected Lauder's claim for defense and indemnity with respect to two environmental claims against Lauder.
OneBeacon cited as justification, in two separate letters, that it "cannot locate any further evidence" of the policy under with Lauder sought coverage.
The court noted neither letter from OneBeacon asserted that Lauder failed to give timely notice of a claim or occurrence.
As such, OneBeacon waived its right to later assert late notice as a reason for denying Lauder's claim, according to the court.
The decision reverses an earlier Supreme Court, New York County decision which held that as long as an insurer claims or reserves the right to do so, it may disclaim coverage on one ground and thereafter disclaim coverage on another ground even if it had knowledge of the latter ground at the time of the initial disclaimer.
James M. McGuire, writing the opinion for the unanimous decision to reverse the Supreme Court ruling, said, "As the duties to disclaim promptly and specifically are imposed by law, an insurer cannot unilaterally absolve itself of these duties. Thus, an insurer cannot avoid a waiver of a defense of which it has actual or constructive knowledge…by a unilateral assertion in a disclaimer notice that it is reserving or not waiving a right to disclaim on other unstated grounds…."
John W. Schryber, lead counsel for Estee Lauder in the case and the founder of law firm Patton Boggs' cost recovery and indemnification practice group, said in a statement the ruling is significant because it "should end insurers' gamesmanship of using 'catch-all' reservations clauses in their coverage-position letters to play 'hide-the-ball' and mislead policyholders."
A representative from OneBeacon declined to comment, citing company policy regarding pending litigation.
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