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The Rogak Report: 09 Apr 2006 ** Coverage - Late Notice **

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  • Lawrence Rogak
    INSURED S EIGHT-MONTH DELAY IN REPORTING INCIDENT TO INSURER RESULTS IN VALID DISCLAIMER; NOTICE TO BROKER IS NOT NOTICE TO INSURER Paul Developers, LLC V.
    Message 1 of 1 , Apr 9, 2006
      INSURED'S EIGHT-MONTH DELAY IN REPORTING INCIDENT TO INSURER RESULTS
      IN VALID DISCLAIMER; NOTICE TO BROKER IS NOT NOTICE TO INSURER

      Paul Developers, LLC V. Maryland Casualty Insurance Company, et al.,
      appellants, et al., defendants. (Index No. 32045/02) (2D Dept 2006)

      In this DJ action, Zurich/Maryland Casualty appealed from a decision
      of Supreme Court, Suffolk County, which denied their Motion for
      summary judgment seeking a declaration that they are not obligated to
      defend or indemnify this plaintiff in an underlying personal injury
      action. The Appellate Division reversed and granted judgment to the
      insurers.

      Assurance Company of America issued a general liability insurance
      policy to the plaintiff Emmy Homes, LLC, naming the plaintiffs Paul
      Developers, LLC, and Foxridge Associates, LLC, as additional
      insureds. The policy, procured by the plaintiffs' insurance broker,
      the defendant Borg & Borg, Inc., obligated the plaintiffs to notify
      Assurance "as soon as practicable of an occurrence' . . . which may
      result in a claim."

      During the policy period, on June 11, 2001, Santos Garcia was injured
      when he was struck by windblown plywood while performing construction
      work at the plaintiffs' job site. By letter dated November 30, 2001,
      Garcia's attorneys sent written notification of Garcia's claim to the
      plaintiffs Paul Developers, LLC, and Foxridge Associates, LLC. On
      August 9, 2002, the plaintiffs faxed a copy of the complaint in the
      underlying action to Assurance's claims adjuster. By letter dated
      August 12, 2002, the insurer disclaimed coverage based upon late
      notice; the letter noted that "our file reveals that your company
      received notice of this loss pursuant to a letter of representation
      from Siben and Siben dated 11/30/01. Assurance Company of America
      received first notice of this loss on 8/6/02."

      The plaintiffs subsequently commenced the instant action for a
      judgment declaring that the defendants Maryland Casualty Insurance
      Company, Zurich Group of Insurance Companies, and Assurance
      (collectively Zurich) were obligated to defend and indemnify them in
      the underlying action. Zurich cross-moved for summary judgment,
      arguing that the plaintiffs failed to comply with the notice
      provision of the insurance policy. The Supreme Court denied the cross
      motion on the ground that a triable issue of fact existed as to when
      Zurich received notice of the Siben & Siben letter dated November 30,
      2001.

      "Where an insurance policy requires that notice of an occurrence be
      given promptly, notice must be given within a reasonable time in view
      of all of the facts and circumstances," held the Second
      Department. "Providing an insurer with timely notice of a potential
      claim is a condition precedent, and thus absent a valid excuse, a
      failure to satisfy the notice requirement vitiates the policy. Where
      there is no excuse or mitigating factor, the issue of reasonableness
      poses a legal question for the court, rather than an issue for the
      trier of fact."

      "Zurich established, prima facie, entitlement to judgment as a matter
      of law by demonstrating that the plaintiffs received notice of the
      underlying claim on or about November 30, 2001, yet failed to give
      notice to them until August 2002, over eight months later."

      "In opposition, the plaintiffs failed to raise a triable issue of
      fact as to whether Zurich received notice of the underlying claim
      prior to August 2002. The fact that the plaintiffs may have provided
      timely notice to their own broker is of no consequence. Notice to a
      broker cannot be treated as notice to the insurer since the broker is
      normally deemed to be the agent of the insured and not the carrier."

      "Under these circumstances, the over eight-month delay was
      unreasonable as a matter of law and justified Zurich's disclaimer.
      Accordingly, the Supreme Court erred in denying Zurich's cross motion
      for summary judgment."

      The case was remanded back to Supreme Court for entry of judgment in
      favor of Zurich.

      Larry Rogak
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