The Appellate Division of the New York Supreme Court, First Department, recently ruled that information disclosed to an insured’s intermediaries (i.e. its insurance broker and its attorneys) suggesting a “reasonable possibility” that the underlying action would exceed the insured’s primary coverage, triggered the insured’s obligation to notify its excess carrier. Martin Assoc., Inc. v. Illinois Nat’l Ins. Co., 2016 NY Slip Op 01616 (1st Dep’t Mar. 8, 2016). The trial court had denied excess carrier Illinois National’s motion for summary judgment declaring that it had no coverage obligation to the insured, Martin Associates, in an underlying personal injury action. The First Department reversed, ruling that Illinois National had no coverage obligation because it did not receive timely notice of the underlying action.
The information in the possession of Martin Associates’ attorneys, which suggested a “reasonable possibility” that primary coverage would be exceeded, was imputed to Martin Associates, though neither the attorneys nor the insured provided that information to the excess carrier. Additionally, Martin Associates was in possession of the injured party’s claim (including summons and complaint) which had been forwarded to the insured’s broker, but was not provided to the excess carrier until years later.
The First Department found that Martin Associates and its broker failed to provide timely notice of claim to Illinois National, and the attorneys failed to inform Illinois National that primary coverage would be exceeded. Those failures of the insured’s attorneys and broker were deemed attributable to the insured. Accordingly, Illinois National had no coverage obligation.
The First Department also determined that notice provided to Illinois National by another insured in the underlying action was not sufficient to satisfy Martin Associates’ own notice obligation. Martin Associates argued that Illinois Nation had been adequately noticed because another insured defendant in the underlying litigation provided notice to Illinois National. But the First Department found that the notice obligation was not satisfied because Martin Associates’ interest were adverse to those of other insureds at all times.
This decision demonstrates that New York courts continue to require insureds to adhere to their contractual notice obligations in order to obtain coverage of a claim.