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The Rogak Report: 01 August 2006 ** Late Notice - Reasonable Excuse **

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  • Lawrence Rogak
    INSURED S REASONABLE BELIEF THAT IT WAS NOT LIABLE FOR ACCIDENT EXCUSES LATE NOTICE Evangelos Car Wash, Inc. v Utica First Ins. Co., 2006 NY Slip Op 51495 (U),
    Message 1 of 1 , Aug 1 4:06 PM
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      INSURED'S REASONABLE BELIEF THAT IT WAS NOT LIABLE FOR ACCIDENT
      EXCUSES LATE NOTICE

      Evangelos Car Wash, Inc. v Utica First Ins. Co., 2006 NY Slip Op 51495
      (U), (Supreme Court, Richmond County) (McMahon, J.) (Index no.
      11147/04)

      The plaintiff Evangelos Car Wash, Inc. is located at 2302 Arthur Kill
      Road, Staten Island, New York. On April 27, 2002, there was a
      collision between a motorcycle and a truck in front of 2286 Arthur
      Kill Road, about 200 feet from the car wash. A witness told the car
      wash owner, Konstantinos Siozios, that the motorcyclist hit the truck
      when he went into the opposite lane of traffic in an attempt to pass
      a slow moving vehicle. In May, 2003, the motorcyclist, Andrew Reyes,
      commenced an action against the car wash. The complaint alleged that
      Reyes slid because the street was wet in front of the car wash.

      On June 3, 2003, Reyes allegedly served the summons by leaving a copy
      of the summons and complaint at the car wash with the Managing
      Agent, "John Loman." However, the car wash claimed that it never
      received the summons and complaint in June, 2003, because no one by
      the name of John Loman worked at the car wash. In a letter dated
      December 2, 2003, Reyes' attorney advised the car wash that it was in
      default. On March 5, 2004, the car wash was served with motion papers
      for a default judgment in the underlying action. On March 8, 2004,
      the car wash faxed a copy of the papers to its insurance broker. On
      March 16, 2004, the broker faxed Utica First a Notice of Claim.

      In a letter dated March 18, 2004, Utica disclaimed coverage due to
      the late notice of the underlying action. The insurance policy
      provided that "in case of an occurrence, or if an insured becomes
      aware of anything that indicates that there might be a claim . . .,
      the insured must promptly give notice to us or our agent."

      Additionally, the policy provided that "if a claim is made or a suit
      is brought, the insured must promptly send [Utica First] copies of
      all legal papers, demands, and notices." The disclaimer set forth
      that the car wash knew of the potential claim at least by June 3,
      2003, when it was served with the summons and complaint, if not on
      the date of the loss. Thus, Utica was denying coverage due to the
      insured's failure to notify it in a timely fashion.

      In April, 2004, the car wash commenced this declaratory judgment
      action seeking a declaration that Utica was obligated to defend and
      indemnify the plaintiff in the underlying action. Utica moved for
      summary judgment dismissing the complaint. The car wash cross-moved
      for summary judgment for a declaration that Utica was obligated to
      defend and indemnify the plaintiff in the underlying action.

      The Court held, first, that "When an insurance policy requires that
      notice of an occurrence or action be given promptly, notice must be
      given within a reasonable time in view of all of the facts and
      circumstances. 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. An
      insured's reasonable, good-faith belief in non-liability may excuse a
      delay in notifying the insurer of an accident. The issue of
      reasonableness poses a legal question for the court, rather than an
      issue for the trier of fact."

      "Insurance Law § 3420(d) provides that an insurer may disclaim
      coverage by giving a written notice of the disclaimer as soon as
      reasonably possible. However, when an insurer disclaims coverage, the
      notice of disclaimer must promptly apprise the claimant with a high
      degree of specificity of the ground or grounds on which the
      disclaimer is predicated. This requirement is not unduly burdensome,
      as the insurer is highly experienced and sophisticated in such
      matters."

      "In the instant case, the disclaimer stated: "It is well established
      that you were aware of the potential claim if not on the date of
      loss, but as early as June 3, 2002, when you were served with a
      summons and complaint. However, under the circumstances of this case,
      the plaintiff had a reasonable, good-faith belief in its non-
      liability. Neither the manner in which the plaintiff believed that
      accident occurred — the motorcyclist going into the opposite lane of
      traffic to pass a slower moving vehicle, nor where the accident
      occurred — 200 feet down the road from the car wash, would have made
      a prudent person believe that a personal injury claim would be
      pursued. Thus, the court finds that it was reasonable for the
      plaintiff not to notify the defendant of the occurrence on the date
      of or shortly after the accident."

      "The only other ground stated in the notice of disclaimer, was that
      the plaintiff was aware of the underlying action on June 3, 2003.
      However, the plaintiff explained that it was not served in June,
      2003, as no one by the name of John Loman was working at the car wash
      at that time. In fact, the motion for a default judgment in the
      underlying action was withdrawn and the plaintiff allowed to assert
      an answer, without a traverse hearing being held. Accordingly, the
      court finds that it was reasonable for the plaintiff not to notify
      the defendant of the claim in June, 2003."

      "In its papers in opposition to the plaintiff's cross-motion for
      summary judgment, the defendant now argues that even if the plaintiff
      was not served with the summons and complaint in June, 2003, the
      plaintiff became aware of the underlying action in December, 2003,
      when Reyes' attorney mailed it a letter advising of the default. The
      defendant contends that the three month delay from December, 2003
      until March, 2004, when the plaintiff notified its broker of the
      underlying action, was unreasonable as a matter of law. Since this
      ground was not raised in the letter of disclaimer, the defendant is
      now estopped from raising it in the instant action as a ground for
      disclaiming coverage."

      "Additionally, the defendant asserts that the plaintiff did not
      properly notify it of the underlying claim because it notified its
      broker, rather than the carrier. While 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, here, it is
      uncontroverted that the broker immediately notified the defendant of
      the claim. Thus, there is no issue in this case as to whether notice
      to the broker was timely, but notice to the carrier was not."

      The insured's motion for summary judgment was granted and it was
      declared that the insurer was "obligated to defend and indemnify the
      plaintiff Evangelos Car Wash, Inc. in the underlying action of Reyes
      v. Evangelos Car Wash, Inc., Index No. 11635/2003."

      Larry Rogak
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