Insurers Must Notify Denials

Section 2 provides the effective date.

Justification

New York Insurance Law requires that for an insurer to deny coverage for a death or bodily injury claim, the insurer must give written notice of the disclaimer to the insured and the injured person "as soon as reason- ably possible." N.Y. Ins. Law § 3420(d)(2). Courts have similarly concluded that "once the insurer has sufficient knowledge of facts enti- tling it to disclaim, or knows that it will disclaim coverage, it must notify the policyholder in writing as soon as is reasonably possible." First Financial Ins. Co. v. Jetco Contracting Corp., 1 N.Y.3d 64, 66 (2003); Montpelier U.S. Ins. Co. v. 240 Mt. Hope Realty Co., 2015 U.S. Dist. LEXIS 143820, *5 (S.D.N.Y. Oct. 22, 2015). Case law further requires that the timeliness of the disclaimer be measured from the point in time when the insurer first learns of the grounds for disclaim- er, and "an insurer's explanation is insufficient as a matter of law where the basis for denying coverage was or should have been readily apparent before the onset of the delay." First Financial, 1 N.Y. 3d at 68-69.

In 2019, the CPLR was amended to revive certain claims and causes of action asserted against public and private entities and institutions arising out of childhood sexual abuse, which may result in those enti- ties and institutions seeking coverage under insurance programs stretch- ing back decades. Many entities will be seeking coverage under purported insurance policies for indemnification against claims arising out of the new provisions of the CPLR. Existing Insurance Law is clear that it is the insured's burden of proving the existence, terms and conditions of the policy or policies. See, Pacific Employers Ins. Co. v. Troy Belting & Supply Co., No. 1:11-CV-912, 2016 U.S. Dist. LEXIS 134224, at *40-.41 (NDNY 2016); see, also, Bianchi v. Florists Mut. Ins. Co., 660 F. Supp. 2d 434, 436 (EDNY 2009). Due to the historic nature of these revived claims and the age of alleged policies to cover such claims, insureds may not have retained copies and supporting records, and may have little or no evidence of existence, terms and conditions. Insurers, too, may be unable to locate any evidence at all, or locate only incomplete copies, without all policy terms and conditions, within the first month after receiving notice. This legislation clarifies that insurers must make diligent efforts to locate alleged policies when notified of claims thereunder. The bill also clarifies, however, that the time in which an insurer must notify an insured of an intention to disclaim or deny coverage for a claim brought pursuant to the CPLR reviver, will not begin to run until the insurer has actual knowledge of the existence of a policy - either because one has been presented by the insured, or one has been located by the insurer - or, after reasonably diligent efforts by both the insured and the insurer, neither is able to locate a copy or sufficient evidence of existence, terms and conditions.

This clarification is consistent with public policy and fairness, that insureds and insurers should Be given as much time as they need, within the bounds of reasonableness, to research and identify insurance poli- cies that potentially apply to a revived claim or cause of action, particularly ones that may be nearly seventy years old.

Prior legislative history

None

Effective date

This act shall take effect immediately and be. deemed to be in full force and effect on the same date and in the same manner as section 3 of chapter 11 of the laws of 2019, and shall apply to all policies entered into