Late notice lives as a significant coverage defense in New York. On March 11, 2008, the Appellate Division entered summary judgment on late notice grounds, reversing the trial court, and rejecting the policyholder’s position that the delay should be excused because the policyholder thought that it was not liable. Donovan v. Empire Ins. Group, 2008 N.Y. Slip Op 2100 (App. Div. 2d Dep’t Mar. 11, 2008).
The Supreme Court of Texas held last week that a late notice defense requires a showing of prejudice. PAJ, Inc. v. Hanover Insurance Co., 2008 Tex. LEXIS 8 (Tex. Jan. 11, 2008).
Governor Spitzer vetoed the bill that would have required prejudice to establish late notice, and allowed direct actions in New York under certain circumstances. The bill would have changed a long-established and considered position in New York common law. The veto is a welcome development for the insurance industry.
It will be interesting to see whether Governor Spitzer signs the legislation that would require insurers to demonstrate prejudice as part of a late notice defense. I hope that the governor declines to sign this bill. The New York no-prejudice position is a minority view, but it is a thoroughly considered view. Insurers should be free to set conditions on their coverage, and prompt notice of claims is a very reasonable condition.
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