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Court of Appeals: Property Exclusions Not Waived by Mishandling Claim

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  • Lawrence
    INSURER S VIOLATION OF CLAIMS HANDLING REGULATION DOES NOT WAIVE DEFENSES TO PROPERTY CLAIM Mallory v Allstate Ins. Co.
    Message 1 of 1 , Aug 28, 2012
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      INSURER'S VIOLATION OF CLAIMS HANDLING REGULATION DOES NOT WAIVE DEFENSES TO PROPERTY CLAIM


      Mallory v Allstate Ins. Co. 
      2012 NY Slip Op 06045
      Decided on August 28, 2012
      Court of Appeals
      Edited by Lawrence N. Rogak



      The order of the Appellate Division should be affirmed, with costs, and the certified question answered in the affirmative.

      Plaintiff sought compensation pursuant to her homeowner's insurance for fire damage. Defendant sought to raise three affirmative defenses based on plaintiff's alleged breach of the insurance policy. Under the facts of this case, the Appellate Division correctly determined that an insurer's failure to comply with 11 NYCRR 216.6 (c) [see text below] in processing a claim does not preclude that insurer from relying upon a policy exclusion to disclaim coverage. 


      Comment:  The regulation cited reads as follows:



       Section 216.6 Standards for prompt, fair and equitable settlements. 
      ***
       (c) Within 15 business days after receipt by the insurer of a properly executed proof of loss and/or receipt of all items, statements and forms which the insurer requested from the claimant, the claimant, or  the claimant's authorized representative, shall be advised in writing of the acceptance or rejection of the  claim by the insurer. When the insurer suspects that the claim involves arson, the foregoing 15 business  days shall be read as 30 business days pursuant to section 2601 of the Insurance Law. If the insurer needs  more time to determine whether the claim should be accepted or rejected, it shall so notify the claimant, or  the claimant's authorized representative, within 15 business days after receipt of such proof of loss, or 
      requested information. Such notification shall include the reasons additional time is needed for 
      investigation. If the claim remains unsettled, unless the matter is in litigation or arbitration, the insurer shall, 90 days from the date of the initial letter setting forth the need for further time to investigate, and  every 90 days thereafter, send to the claimant, or the claimant's authorized representative, a letter setting  forth the reasons additional time is needed for investigation. If the claim is accepted, in whole or in part, the  claimant, or the claimant's authorized representative, shall be advised in writing of the amount offered. In any case where the claim is rejected, the insurer shall notify the claimant, or the claimant's authorized representative, in writing, of any applicable policy provision limiting the claimant's right to sue the insurer. 

      While this very brief memorandum decision does not elaborate, I will presume that Allstate blew the 15 day period to accept or reject the claim after receiving the proof of loss.  Whatever the claimant's alleged breaches of the policy were, Allstate's defenses based on those breaches were not waived by missing the 15 day deadline.

      Larry Rogak
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