Is It Unreasonable to Require An Insurer to Disclaim on Grounds of Late Notice ?
In Ace Packing Company, Inc. v. Campbell Solberg Associates, (41 AD3d 12, 13, 835 N.Y.S.2d 32 [1st Dept 2007]), the Court found that it would be "draconian" to require an insurer to disclaim on grounds of late notice before an investigation could be made as to the particulars of the insured's knowledge of the claim.
In Ace, the insurer's investigator was thwarted by its insured from obtaining any evidence concerning "the circumstances surrounding the accident and what plaintiff did when it first received notice of the claim and the resulting law suit." Id. at 14.
However, in Ace, the Court noted that the insurer did not know "when plaintiff first learned of either the accident or the lawsuit." Id. at 15.
Insurance Law 3420 (d) requires that an insurer give notice of disclaimer "as soon as is reasonably possible."
While an insurer should be allowed a sufficient time to conduct an investigation of the incident, if the ground for disclaimer is "obvious on the face" of the notice of claim, no investigation is necessary, and as little as a 30-day delay in giving notice of disclaimer is unreasonable. West 16th Street Tenants Corp. v. Public Service Mutual Insurance Company, 290 AD2d 278, 279, 736 N.Y.S.2d 34 (1st Dept 2002); see also Pav-Lak Industries, Inc. v. Arch Insurance Company, 56 AD3d 287, 866 N.Y.S.2d 671 (1st Dept 2008).